2012 (4) TMI 732

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.... of the scrip of M/s. Adani Exports Ltd. (the company) and he was found to have acted, alongwith a few other entities, in the manipulation of the scrip of the company.  The Board conducted investigations in the buying, selling and dealing in the shares of the company for the period November 27, 2003 to December 23, 2003.  During investigation, it was noticed that there was sharp increase in the price and volume of the scrip on National Stock Exchange of India Limited (NSE) and the Bombay Stock Exchange (BSE).  The price of the scrip increased from 209.55 to  443.10 in a span of 19 trading days.  The scrip registered the highest price of 478 on December 19, 2003.  The adjudicating officer found that the appellant, alongwith a few other entities, was involved in market manipulation and so the provisions of FUTP Regulations were attracted.  A show cause notice was issued on           May 31, 2006 calling for the appellant's explanation.  The adjudicating officer called upon the appellant to show cause as to why an enquiry should not be held against him for fraudulent and unfair trade practices an....

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....the adjudicating officer has complied with all the requirements of Rule 4(1)    and 4(3) before concluding that the appellant is liable to penal action.    The wording in the said paragraph as to why penalty should not be imposed cannot be taken as prejudging the issue.  The series of correspondence between the adjudicating officer and the appellant subsequent to the issue of show cause notice would show that documents relevant to the proceedings were provided to the appellant and sufficient opportunity provided to him for defence.  The purpose of issuing show cause notice is to make a person aware of the wrong doing and to provide sufficient opportunity to defend himself and thereby come to a proper and well reasoned conclusion regarding the conduct of the person.  These notices are essential for avoiding unjust and arbitrary action of the authorities.  So, what is crucial for consideration is whether the person accused has been given sufficient notice and reasonable opportunity to defend himself.  In the present case, we find that the above requirements have been complied with.  The show cause notice was issued on May 31....

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....elay, the ground taken by the appellant's learned counsel cannot be entertained. 8. With regard to the merits of the case, the main argument of the appellant is that the alleged volume of transactions is negligible as compared to the total trades in the scrip of the company and it has not created any impact on the market.  According to the appellant's learned counsel, the volume traded in both the NSE and BSE should have been compared visà-vis the alleged manipulative transactions and it would be evident that the volume relating to manipulation is very negligible.  It is also contended that the appellant should have been provided with the entire trade logs relating to the transactions in the scrip of the company and the failure to do so has resulted in miscarriage of justice.  A reference is made to the order of this Tribunal in Appeal no.207 of 2011 dated 23.1.2012 (Nrupesh C. Shah vs. Securities and Exchange Board of India) wherein the volume of shares transacted is mentioned to be a critical factor and if that decision is applied to the present case the penalty imposed is highly excessive.  In brief, the appellant would contend that there was no del....

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....t relates to creation of artificial volumes by the manipulative trades undertaken by the appellant.  The adjudicating officer has brought on record the manipulative trades in a convincing manner.  "I find that the Noticee had entered into fictitious synchronized and/ reversal trades trading with specific counterparties. Also for most trades, buy and sell orders were placed within seconds (0 to 11 seconds) of each other. The order limit prices and quantities were also matching with those of the designated counterparty in almost all the trades. The reversal of most trades took place on the same day or on next day after execution of first set of trades. It cannot be a co-incidence that such a large number of transactions spread over many days have matched between specific brokers only. Also, the zero time difference or near zero time difference between placement of buy and sell orders indicates your clear intention to create artificial volume on the days of your trades. Such type of transactions cannot be considered as genuine transactions." 11. The facts of the case would show that the appellant and the connected entities have placed orders in such a way as to e....