https://www.taxtmi.com/css/info/rss_sitemap/rss_feed.css?v=1746094055 https://www.taxtmi.com Business/Tax/Law/GST/India/Taxation/Policies/Legal/Corporate Tax/Personal Tax/Vat Law/Legal Information/Tax Information/Legal Services/Tax Services Tax Management India. Com / MS Knowledge Processing Pvt. Ltd. All rights reserved. One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=461793 https://www.taxtmi.com/caselaws?id=461793 Violations of the SEBI laws - Misuse of clients' funds by stock broker - appellant stock broker failed to settle the funds and securities of its clients, misused the client funds and, therefore the penalty was imposed - non-existence of formula in the previous circular - HELD THAT:- The contention of the appellant cannot be accepted. This Tribunal had an occasion to deal with a similar objection regarding the applicability of the subsequent circular in the case of Arihant Capital Markets Ltd. [2021 (10) TMI 1463 - SECURITIES APPELLATE TRIBUNAL, MUMBAI] the order cannot be faulted with. The earlier circular had clearly stated that the funds of the client cannot be applied for any other purposes. The appellant's case was that the funds were applied by it for the dues for their associates, group company, etc. Now, during the arguments only, the issue of nonexistence of formula in the previous circular is brought up. In fact, the said formulization is nothing but the crystallization of the earlier circular Thus, the subsequent circular was merely formulization of the earlier circular to prevent the misuse of the clients' funds either for its own purpose by the stock broker or for debit balance of the clients. The record clearly shows that the appellant has used the credit balance of the clients in the fashion as stated above. Non-settlement of the funds and securities it was found that credit balance of 1311 inactive clients was not settled by the appellant. Nine active clients balance was not settled. According to the appellant as per its own interpretation of NSE's circular dated 29th October, 2013 the pay out of client whose credit balance was less than Rs. 10,000 was not required to be done at the relevant time. However, when the Exchange had clarified thereafter the appellant had regularly started settling the clients' funds having credit balance upto Rs. 10,000. Respondent SEBI found that the appellant has not produced any documentary evidence to support its case for non-settling of the accounts being less than Rs. 10,000. Regarding the interpretation of the NSE circular, respondent SEBI held that as per appellant itself has misinterpreted the circular. Not only that no material was produced to show that so far as 1311 inactive clients are concerned their credit balance was less than Rs. 10,000. Out of the cases of 9 active clients whose accounts were not settled, the appellant itself had admitted these irregularities in 5 active clients' cases. Thus, no reason to interfere in the impugned order. Appellant had taken a plea of delay and latches in initiation of proceedings. It was submitted that while the inspection was held in the year 2015 the show cause notice was issued on September, 2020. Appellant therefore submitted that this delay itself has caused prejudice to the appellant. We find that except the bald statement that the delay has caused prejudice no facts are pleaded to show as to how prejudice is caused to the appellant by delay of 5 years. The respondent had collected the record during inspection from the appellant and again placed the same before the appellant vide the show cause notice. The appellant also had the said record with it. Therefore, considering all the facts on record we do not find any error to interfere with the impugned order. Case-Laws SEBI Tue, 03 Jan 2023 00:00:00 +0530