TMI Blog2013 (10) TMI 1475X X X X Extracts X X X X X X X X Extracts X X X X ..... ergone by the appellants is to be deducted from the period of five years. However, the restraint already imposed by ad-interim ex parte order dated December 28, 2011 in respect of appellants stock broking business is to continue till the completion of the enquiry proceedings which are directed to be finalized expeditiously. It is also mentioned in the impugned order dated July 31, 2013 that no observation and/or finding contained in it shall influence the enquiry officer in finalizing the enquiry report. 2. Appellant no. 1, namely, Grishma Securities Pvt. Ltd., hereinafter referred to as Grishma , is a company incorporated under the Companies Act, 1956 and is registered with the respondent as a stockbroker with effect from February 29, 2000. Appellant no. 2, Mr. Mihir Ghelani, is the Chief Executive Officer of appellant no. 1. Appellant no. 3, Shri Ketan Shah, is the Managing Director of the appellant no. 1. Appellant nos. 4 and 5, namely, Chandrika H. Gandhi and Mr. Chhabil C. Shah are the directors of Appellant no. 1. 3. Briefly stated the facts of the case are that one listed company, namely, Tijaria Polypipes Limited, hereinafter referred to as TPL , came out with an I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 as ad-interim ex-parte order had already been confirmed by the respondent by order dated November 5, 2012 under Sections 11 and 11B of the SEBI Act, 1992. The appellants also took a plea regarding discrimination that some other brokers and entities who dealt in the scrip and against whom directions were issued vide ad-interim ex-parte order dated December 28, 2011 was revoked whereas the same was confirmed and continued in respect of appellants. While dismissing the said appeal this Tribunal pertinently observed that :- 8. We are of the view that the whole time member has passed the order dated November 5, 2012 after considering the submissions made by the appellants and has recorded sufficient reasons for continuation of the impugned order. Simply because interim order has been revoked against other brokers, it cannot be a ground for revoking the interim order against the appellants. It depends on the role played by them in manipulation of the scrip of the company. It is not in dispute that Sections 11/11B of the Act empower the Board to restrain any person from accessing the securities market and prohibit any person associated with the securities market to buy, sell or deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a gross misdemeanor, the respondent has also made a passing insinuation that the concerned client of the appellants could be a front for Grishma. The appellants contend that this is a vague and unambiguous charge and it talks of appellants being facilitators at one place and perpetrators at the other. As for the appellants, these two prepositions cannot co-exist. 9. The appellants moot defense in this regard is that Grishma merely acted as a Stock Broker for a client, namely Mr. Jivraj Zala, hereinafter referred to as Zala , who traded as a client of Grishma after furnishing post dated cheques to the tune of ` 11.36 crore. One Mr. Chetan Dave, a client of Grishma, also acquired some shares of TPL from the allottees in the IPO. However, appellants have not traded at all in the share of TPL on their own account but only for the client. The appellants vehemently contended that the respondent has failed to consider their submission based on SEBI s circular dated February 23, 2005 regarding margin money. The appellants submit that they have the discretion on how much of such margin money should be collected from a client. The form and mode of collection also fall within the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to authorize the appellants to use securities or funds of a client for the purpose of some other client. This itself is illegal. The respondent has also distinguished other instances where SEBI/SAT is stated to have exonerated the brokers of somewhat similar charges. 12. We have heard the learned counsel for the parties at length and have minutely perused the pleadings and submissions made by the parties before us. 13. First, we may deal with the contention of the appellants that they have been treated in an arbitrary manner violating their Fundamental Right to carry on trade, etc., and that simultaneous enquiry and adjudication proceedings initiated on the same set of facts and allegations are impermissible. In this connection, we may note that Article 19(1)(g) of the Constitution does guarantee to all citizens of India a right to practice any profession, or to carry on any occupation, trade or business. At the same time, sub-clause (6) of Article 19 of the Constitution lays down in clear terms that nothing in Article 19(1)(g) shall affect the operation of any existing law insofar as it imposes reasonable restrictions on the exercise of such a right in the interest of gene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... convinced that the proceedings initiated against the appellants under Section 11 and 11(b) of the SEBI Act culminating into the impugned order dated July 31, 2013 do not suffer from any such legal infirmity in the peculiar facts of the present case in as much as there is no violation of any of the fundamental rights of the appellants as guaranteed by the Constitution. 16. In addition to these proceedings, the respondent has undertaken inquiry proceedings under the Securities and Exchange Board of India (Intermediaries) Regulations, 2008. Adjudication proceedings as envisaged under Chapter VI-A of the SEBI Act have also been initiated against the appellants pertaining to the incidents which took place on October 14, 2011, in the issuance of the IPO of TPL and the steep fall in the price of shares on the same day. It is pertinently noted that the adjudication proceedings may lead to monetary penalty or even exoneration of the appellants. Whereas, the enquiry proceedings have the potential of leading to appropriate disciplinary action against the appellants in case the charges are proved in the enquiry. There is no categorical challenge to such parallel proceedings. Therefore, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o other clients, Grishma itself and Mr. Mihir Ghelani, Grishma s Chief Executive Officer. The reason for showering such liberal favours upon Zala by the appellants only points out a needle of suspicion towards Grishma s conscious and possible role in the whole matter by not taking any margin and by accepting post-dated cheques from Zala and allowing him to trade enormously thereby exposing the capital market to a serious risk. Therefore, the Board, through learned WTM, has rightly intervened in the matter to nip the evil in the bud before it could have turned into a bigger scam. 19. The appellants cannot pick up a line from one of the circulars and interpret it in isolation to their advantage. While elaborating and streamlining a Comprehensive Risk Management Framework for the cash market, the SEBI circular dated February 23, 2005 lays greater importance on advance collection of margin by introducing a more stringent margining structure. This was done in the light of experience gained in the past under various circulars issued by SEBI from time to time. The circular relied upon by the appellants has to be read in totality and also keeping in view the larger objective which it se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form of 1,50,000 shares of Kwality Dairy Ltd. Those shares were also received by Grishma from Vimal Patel in an off-market transfer. 22. In the case of BSE margins also similar modus-operandi has been adopted by appellants. Cash and securities provided by Grishma by way of margin to cover the trades of Zala were again provided by Grishma, Ghelani and Patel. Two amounts of ` 50 lac each transferred by Grishma to the Clearing Corporation on October 14, 2011 were funded from Grishma s own accounts. The amount of ` 35,86,814/- transferred by Grishma to the Clearing Corporation on October 14, 2011 was funded by Ghelani. 23. In this respect, it may be pertinent to note that as regards securities of ` 1,27,48,297 provided as part of the margin by Grishma, the shares were previously pledged by Grishma with IL FS Securities Services. These shares were withdrawn from IL FS on October 12, 2011 and were pledged with the clearing corporation on October 13, 2011. This conduct prima facie shows that Grishma was putting margins in place for the anticipated losses that would be incurred in the Zala trades the next day. Out of these securities, 50,000 shares of Shasun Pharmaceuticals Ltd. and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 156 of 2010 dated October 22, 2010], involves an interim order passed by SEBI pending an ongoing investigation and not a final order passed after a complete consideration of the facts and material on record. This Tribunal s order in India Capital Markets Pvt. Ltd. vs. SEBI [Appeal no. 124 of 2010 dated July 26, 2010] is again regarding an interim order pending investigation. The bench also took note the fact that in ongoing inquiry proceedings, the designated authority had submitted a report recommending the penalty of a warning and that the designated member had not agreed with those findings and was proceeding further in the matter. 28. We have, therefore, no hesitation in holding that no discriminatory or arbitrary treatment is meted out to the appellants in passing the impugned order dated July 31, 2013 passed by the learned WTM and the same is hereby upheld. It is further held that various circulars issued by the SEBI from time to time have led to a well developed margining system in India. The collection of margins as a regulatory requirement prescribed by the SEBI is a pre-requisite. Its sanctity cannot be undermined by allowing the appellants to bypass such requireme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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