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2019 (9) TMI 591

..... nces before SEBI - HELD THAT:- An order of the recognized stock exchange is appealable under Section 23L of the Act. Some of the duties and functions of a recognized stock exchange has been transferred to a clearing corporation namely, NSE Clearing Ltd. This clearing corporation has been recognized under Section 4 read with Section 8-A(4) which provision is to recognize a stock exchange. Thus if an order of a recognized stock exchange is appealable under Section 23L, the functions and duties of a recognized stock exchange which have been transferred to a clearing corporation would also be appealable under Section 23L. A clearing corporation cannot stand on a better footing or cannot stand outside the provisions of the SCRA Act especially when a superior body, namely, the recognized stock exchange’s orders are appealable under Section 23L. In the light of the aforesaid, we hold that the appeal filed by the ISSL is appealable under Section 23L against a decision of the NCL. The objection raised by SEBI is, thus, rejected. ISSL has questioned the legality and validity of the order of NCL dated 24th June, 2019 whereby their application for annulment of the trade was rejected. NCL .....

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..... 9 With Appeal No.261 of 2019 - 3-7-2019 - Mr Tarun Agarwala, Presiding Officer, Dr. C. K. G. Nair, Member And Mr M.T. Joshi, Judicial Member For The Appellant : Mr. J.J. Bhatt, Senior Advocate with Mr. Venkatesh Thond, Mr. Piyush Raheja, Advocate with Ms. Shruti Rajan, Ms. Garima Joshi, Mr. Aditya Sikha, Mr. Rushin Kapadia, Advocates i/b. Cyril Amarchand Mangaldas For The Respondent : Mr. P.N. Modi, Senior Advocate with Mr. Nihar Mody, Mr. Ashish Prasad, Mr. Abhiraj Arora, Mr. Vivek Shah, Advocates i/b. ELP, Mr. Mustafa Doctor, Senior Advocate with Mr. Mihir Mody and Mr. Sushant Yadav, Advocate i/b. K. Ashar & Co, Mr. Shyam Mehta, Senior Advocate with Mr. Sachin Chandarana, Advocate with Mr. Rashid Boatwalla, Mr. Rahul Jain and Mr. Pruthvi, Advocates i/b. Manilal Kher Ambalal, Mr. Robin Shah, Advocate, Mr. Somasekhar Sundaresan, Advocate with Mr. Tomu Francis, Mr. Manish Chhangani and Mr. Arka Saha, Advocates i/b. Khaitan & Co., Mr. Kunal Katariya, Advocate with Mr. Kunal Kothary, Advocates i/b. Mr. Zerick Dastur, Advocates & Solicitors Mr. Pulkit Sukhramani and Ms. Stuti Shah, Advocates i/b. J. Sagar & Associates, Mr. Janak Dwarkadas, Senior Advocate with Ms. Anuja .....

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..... er held in its order of 29th March, 2019 that the appropriate authority for annulment of the trade was the Stock Exchange in terms of SEBI circular dated 16th July, 2016. 7. ISSL being aggrieved by the said order filed Appeal no.138 of 2019 which was disposed of by the Tribunal s order dated 15th May, 2019 directing ISSL to move an appropriate application under Clause 5 of Chapter VII of the Bye Laws of NCL for annulment of trades. This Tribunal directed that if such an application was filed, the Clearing Corporation would decide the matter at the earliest after hearing the parties. 8. The Clearing Corporation NCL by an order dated 24th June, 2019 rejected the application of ISSL for annulment of trade on the ground that appropriate orders can only be passed after investigation on all allegations of fraud is completed by SEBI and Economic Offence Wing (hereinafter referred to as EOW ). The Clearing Corporation was of the view that it is not an appropriate case where NCL should start a parallel investigation and exercise its powers under Clause 5 of Chapter VII of the Bye Laws of NCL or pass any interim order. 9. Against the order of the Tribunal dated 15th May, 2019, ISSL filed a S .....

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..... Y option trades. The appellant made a formal complaint to SEBI on 31st December, 2019 praying that the units which were transferred illegally to ISSL by Allied should be restored to their demat account. Further, a complaint was made to SEBI on 21st January, 2019 requesting that a personal hearing be granted. Emails dated 30th January, 2019 and 4th February, 2019 was sent seeking return of their securities. Since no action was taken nor any opportunity of hearing was given at the time of passing the exparte interim order by SEBI on 27th February, 2019 nor any opportunity was given to them by SEBI when the exparte interim order was confirmed on 17th May, 2019 nor any opportunity was given to the appellant when SEBI passed an order dated 20th June, 2019 modifying its earlier orders, the appellant has approached this Tribunal praying that they are vitally affected by the order dated 20th June, 2019 and, therefore, the said order should be set aside. 10. Dalmia Cement (Bharat) Limited has filed Appeal Lodging No.358 of 2019. Dalmia cement also alleged that certain shares and units kept in their demat account was illegally transferred by Allied to ISSL. Complaints were made to SEBI as we .....

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..... n that period. (3) On receipt of an appeal under sub-section (1), the Securities Appellate Tribunal may, after giving the parties to the appeal, an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or setting aside the order appealed against. (4) The Securities Appellate Tribunal shall send a copy of every order made by it to the parties to the appeal and to the concerned adjudicating officer. (5) The appeal filed before the Securities Appellate Tribunal under sub-section (1) shall be dealt with by it as expeditiously as possible and endeavour shall be made by it to dispose of the appeal finally within six months from the date of receipt of the appeal. From a perusal of the aforesaid it is clear that, an appeal can be filed against an order or decision of a recognized stock exchange or the Adjudicating Officer or any order made by SEBI. 17. Section 2(J) defines stock exchange as under:- (j) stock exchange means- (a) any body of individuals, whether incorporated or not, constituted before corporatisation and demutualisation under sections 4-A and 4-B, or (b) a body corporate incorporated under the Companies Act, 1956 (1 of 1956), whether un .....

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..... y apply in relation to a recognized stock exchange. From the aforesaid it is clear that, some of the duties and functions of a recognized stock exchange as a clearing house namely, the periodical settlement of contracts and differences thereunder, delivery of, and payment for, securities, and any other matter incidental to, or connected with was transferred to a clearing corporation. Sub-Section (4) of Section 8-A provides that the provisions of Sections 4, 5, 6, 7, 8, 9, 10, 11 and 12 of the Act will apply to a clearing corporation as it applies to a recognized stock exchange. 22. Pursuant thereto, the NSE Clearing Limited (NCL) came into existence as a clearing corporation under Section 8-A of the SCRA Act by a notification dated 26th September, 2017. The SEBI renewed the recognition for a period of three years under Section 4 read with Section 8-A of the SCRA Act. As a result of this notification, NCL is a recognized clearing corporation under the SCRA Act. 23. The limited question is, whether the respondent-NSE Clearing Ltd. being a recognized clearing corporation is akin to a recognized stock exchange or not? We find that an order of the recognized stock exchange is appealable .....

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..... I and EOW. Further, the appellants Keshav Prasad Mishra and others, Novjoy and Dalmia are not clearing members and thus cannot apply for annulment of a trade / deal under clause 5 of the Byelaws of the clearing corporation. 29. We find that Section 11 and 11B of the SEBI Act gives wide powers to the SEBI (Board) to protect the interest of investors in securities and to promote the development and regulate the securities market. Under Section 12A of the SCRA Act, SEBI (Board) has power to issue directions to any stock exchange, clearing corporation or an agency associated with the securities market. By our earlier Order dated 15/5/2019 in Appeal No.138 of 2019, IL&FS Securities Services Ltd. vs. SEBI and others, we held that SEBI has wide powers to consider the complaint with regard to an annulment of a trade. 30. We had also held in the said order held that even where a person is affected either directly or indirectly, the said person would have a right to apply for modification of the order and if such a person applies for being heard for protection of its interest, SEBI could not deny the opportunity of being heard. In the light of the aforesaid, we find that Novjoy and Dalmi .....

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..... on a preponderance of probability that a fraud has been perpetuated, is again a question which is required to be decided by an authority. It is not appropriate for this Appellate Tribunal to go into the question at this stage. We are of the opinion that such matter is required to be decided by an authority. Since NCL has refused to decide the application for annulment of trade on the ground that parallel investigation is being conducted by SEBI, we dispose of all the aforesaid appeals with the following directions:- (i) All the appellants will file an appropriate application for redressal of their grievances before SEBI by 8th July, 2019 annexing their earlier applications / complaints / emails and praying for specific relief / reliefs. (ii) Counter-parties like Citi Bank and similarly connected entities may appear before SEBI and place their objections, if they so desire. (iii) SEBI will consider all the complaints and applications and provide an opportunity of hearing to the appellants, to all interested parties and take a conscious decision by reasoned and speaking order; (iv) All the parties will appear before SEBI on 10th July, 2019 at 3 p.m. on which date SEBI will hear and d .....

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