TMI Blog2019 (12) TMI 1142X X X X Extracts X X X X X X X X Extracts X X X X ..... ing from ₹ 15 lakhs to ₹ 1 lakh on the ground of proportionality. Regarding the penalty imposed on other violations we do not agree with the submissions of the appellant. As the documents clearly show that such violations have been committed, the appellants' hyper technical submissions do not have any merit; what is relevant is whether the appellant, based on the evidence available, has committed those violations and whether any satisfactory explanation has been provided either in mitigating the violation or in proving that the violations have not been committed. The facts and records speak volumes about the way in which the appellant has been running the business of broking and violating multiple provisions of bye laws and circulars issued by the respondent as well as by SEBI. Accordingly, we do not find any deficiency in reiterating the penalty imposed by the DAC when such violations have been noticed by the respondent. The appellant's attempt to prove that the CA Certificate provided to the respondent Exchange was in the correct proforma, since the same was accepted by the NSCCL does not stand to merit. We note that, many of the contents of those profor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directions of DAC. 2. Appellant is a trading member of the NSE in the Capital Market ( CM for convenience), Futures and Options ( F O for convenience) and Currency Derivatives Segments ( CD for convenience). The NSE conducted a regular inspection of the books and other relevant records of the appellant in April 2012 covering the period from August 01, 2011 to February 27, 2012. The said inspection also covered issues relating to certain investor complaints. During the said inspection several violations of various regulations, rules and bye laws of Securities and Exchange Board of India ( SEBI for convenience), NSE as well as the National Securities Clearing Corporation Limited ( NSCCL for convenience) were noticed and a show cause notice dated May 02, 2012 was issued to the appellant directing the appellant to provide its explanation as well as to show cause as to why disciplinary action should not be initiated against the appellant. Further, the appellant has been disabled by NSE in the CD segment w.e.f. May 04, 2012 due to margin violation, from F O segment w.e.f. August 06, 2012 due to shortages of security deposits and from the CM segment w.e.f. August 21, 2012 due to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts in excess of the penalties levied by Exchange, false reporting of margin in F O and CD segment, wrong reporting of margin in F O and CD segment, actual settlement of funds and securities not done periodically as well as on clients' request, excess brokerage charged to clients, use of client bank account and receipt from clients deposited in own bank account/payment to clients made from own bank account, for non-issuance of contract notes and daily margin statement regularly to client, and for contravening clauses included in client registration documents. In addition, refund of penalties levied on clients in excess of the penalties levied by the NSCCL and refund of the excess brokerage amount to the respective clients has also been ordered. Advice/Warning was issued for non-maintenance of clients ledgers properly, abstain from levying late pay-in charges in excess of rates agreed upon by the clients, to put in place necessary checks and balances to ensure investor safety and maintenance of up to date financial records and other procedural steps. 4. Learned counsel Shri Piyush Raheja appearing on behalf of the appellant submits that the appellant received its registration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particular format was not given by the appellant to NSE is not correct, because, no such format was received by the appellant; only an Email was received almost 2 years after submission of the original CA Certificate in June 25, 2012. In any case, the contents of the certificate given by the appellant and what is stated to be the appropriate format of CA Certificate are the same and hence there was no ground for rejecting the first certificate submitted by the appellant in June 25, 2012. (d) Further, even if the information furnished in the CA Certificate was not in the prescribed format the information given was not incorrect but may be only incomplete. In such a situation, no penalty should have been imposed. In any case, the alleged margin shortfall is devoid of merit as it was already informed to the NSE that there was sufficient margin available in the account of the shareholders of the appellant which is a closely held company. 5. Similarly, the appellant refutes the charge of the DAC that the appellant did not do actual settlement of funds and securities of the clients periodically as well as on their request by citing mistakes on the part of the NSE inspection team or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the total penalty imposed is only ₹ 37.89 lakhs, which given the seriousness of the violations, is only reasonable. 10. Without getting carried away by the extremely circuitous, hair- splitting and hair- raising arguments of the appellant and in the interest of justice we proceed to discern the factual matrix as well as the veracity of the submissions of the appellant. We find some substance in the submissions of the appellant that the penalty of ₹ 15 lakhs imposed for wrong reporting could have been different in terms of the provisions in the relevant NSE Circular dated December 24, 2010. In the said circular, there are two broad provisions relating to wrong reporting under the heading Margin reporting requirement in category (a) where percentage of factual wrong reporting of margin collection from constituents and in (b) percentage of margins not properly accounted for (where excess margin available with member in the accounts of relatives, with authorizations). The appellant is taking shelter under (b) while the respondent has issued the order under (a). Although the DAC has found some deficiencies in the claim of the appellant that his relatives had excess mar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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