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TMI Blog2020 (1) TMI 716X X X X Extracts X X X X X X X X Extracts X X X X ..... of client. The circular dated November 18, 1993, inter-alia, provides as under:- 'Regulation Of Transactions Between Clients And Brokers ** ** ** C] What moneys to be paid into "clients account". No money shall be paid into clients account other than - i. money held or received on account of clients; ii. such money belonging to the Member as may be necessary for the purpose of opening or maintaining the account; iii. money for replacement of any sum which may by mistake or accident have been drawn from the account in contravention of para D given below; iv. a cheque or draft received by the Member representing in part money belonging to the client and in part money due to the Member. D] What moneys to be withdrawn from "clients account". No money shall be drawn from clients account other than - i. money properly required for payment to or on behalf of clients or for or towards payment of a debt due to the Member from clients or money drawn on client's au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounts in Anand Rathi Commodities Ltd. This was done just to facilitate the clients to fulfill the client's obligation in respect of the segment for the ease of operation, who were trading across various segments. This was being done on the strength of letter of authority from the clients to make the process more simple, hassle free and cost effective. The appellant also forwarded a copy of the adjudication order of the another Adjudicating Officer (hereinafter referred to as, 'AO') dated May 4, 2009 wherein the very same explanation for a different period was accepted. Therefore, the appellant wanted that the proceedings be dropped. 6. The present AO however, found that all the transactions were carried out against the provisions of the circulars. The earlier order passed in the previous adjudication proceedings was taken by AO as the mitigating circumstances, and therefore, the penalty of Rs. 30 lacs as detailed above was imposed. 7. Mr. Pesi Modi, the learned senior counsel for the appellant submits that in fact the circular dated November 18, 1993 itself provides that money can be withdrawn from the client's account on his authority. Further, the same was don ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This is in violation of the circular. 12. The submission that the money was withdrawn from one account and credited to another account was on the strength of the letter of authority from the respective client cannot be accepted so far as the present circular is concerned. In our view, the appellant had committed breach of the directions contained in the said circular. 13. However, considering the fact that though none of the prescribed mode of cash transfer was adopted by the appellant as provided by the circular, nonetheless, there was no cash handling in any of the transactions. Considering all these facts on the record, in our view, a penalty of Rs. 5 lacs would be fair. Appeal No. 29 of 2016 Greshma Shares and Stocks Ltd. :- 14. In the present case, SEBI found that in 65 instances of payments amounting to Rs. 36,94,510.34 were made from the clients bank accounts to the appellant's group company dealing in commodities market during the year 2012-13. During inspection, it was observed that the appellant has taken authorization from the client wherein the amount involved was more than Rs. 5,000/-. In 17 instances an amount of Rs. 19,344.65 was transferred without authoriza ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sufficient. Appeal No. 196 of 2016 Sushil Financial Services Pvt. Ltd. :- 19. In the present appeal, the penalty of Rs. 16 lac and 8 lacs was imposed on the appellant under Section 15HB of the SEBI Act and 23D of the Securities Contracts (Regulation) Act, 1956 (hereinafter referred to as, 'SCRA') respectively, basically for non-compliance with the provisions of the circulars. During inspection, the respondent SEBI noted following three acts of the irregularities :- "2.1.1. Inter mingling of funds between securities client bank account and commodities client bank account. 2.1.2. Using the credit fund balances of clients for purposes other than specified in the circulars. 2.1.3. Not incorporating / mentioning the word "Client Account" in the bank account name which is required as per the SEBI circular." 20. As regard the first irregularity, it is an admitted fact that the appellant had an associate company named and styled as Sushil Global Commodities Pvt. Ltd. (hereinafter referred to as, 'SGCPL') which was a commodity broker. This SGCPL was registered as a client with the appellant with a specific trading account. It however, did not trade in the securiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rge, he submits that the AO's order is erroneous as in day to day transactions, balances are required to be adjusted on net basis. 25. He further submitted that all these violations are of technical nature and, therefore, relying on the decisions of this Tribunal in three cases, he submits that no penalty was warranted. 26. In our view, while the violation as regard the first charge is admitted by the appellant, the explanation regarding the second charge is not acceptable. The clients account cannot be tinkered with that for pay-in and pay-out on net basis of the appellant. 27. As regard the penalty, we have perused the copies of the order passed by this Tribunal, filed as Annexures 'K', 'L', and 'M'. The reasons forwarded by this Tribunal in these cases would show that only some technical violation has occurred and, therefore, either the penalty was modified or the order of the AO as regards penalty was set aside in the facts and circumstances of each of the case. 28. In the present case, what we find is that the appellant has accepted the cash transactions from SGCPL and vice versa. As regards the second charge, the same is also established, in vi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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