2019 (9) TMI 1477

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....) during the period April 7, 2005 to May 31, 2006. The appellant traded in the scrip in Bombay Stock Exchange Ltd. ('BSE' for short) through her broker, namely, Parasram Holdings Pvt. Ltd. ('Parasram' for short). On December 12, 2013 SEBI issued a show cause notice under Rule 4 of SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995. Thereafter, following the normal procedure of providing personal hearing, seeking replies etc. the AO passed an order dated July 22, 2014 whereby a penalty of Rs. 60 lakh was imposed on the appellant. Aggrieved by that order, an appeal was filed before this Tribunal (Appeal No. 324 of 2014) and vide order dated April 29, 2016 this Tribunal remanded the matter to the AO SEBI with the following direction:- "Since the question as to whether the appellant traded on the Stock Exchange at Mumbai as a sub-broker or in individual capacity goes to the root of the matter, we deem it proper to quash and set aside the impugned order and restore the matter for fresh decision on merits and in accordance with law." 3. Thereafter, SEBI appointed a fresh AO. Further, a notice dated August 24, 2017 w....

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....nalty for the same cause of action. This principle is upheld in the order of the Hon'ble Supreme Court in the matter of Kunjan Nair Sivaraman Nair v. Narayanan Nair [2004] 3 SCC 277. Therefore, the AO has travelled beyond his powers in the matter as imposing a second penalty for the same cause of action is illegal and unsustainable. (b) Without prejudice to the above, the AO should not have passed any order because the appellant was trading in BSE in the scrip of Gangotri as a sub-broker and not as a client. She had no connection with the Vishvas group and no connection has been established in the impugned order. The appellant did not make any profits; rather incurred losses. (c) Synchronized trade per se is not illegal as held by this Tribunal in the matter of Ketan Parekh v. SEBI [Appeal No. 2 of 2004, dated 14-7-2006] Appellant had no intention to manipulate the market and was doing normal trading business on behalf of her clients therefore if at all any manipulation was involved it was done by the clients, no by the appellant. In any case, it was impossible to manipulate the market as the trading had been done on the exchange platform, on the anonymous tra....

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.... that the impugned trades were carried out by the appellant in her capacity as client. There is no documents / agreement entered into between the stock broker, the appellant and her so called client Perfect Car Scanners Pvt. Ltd. The finding in the order of the Delhi High Court in the matter of National Stock Exchange (supra) relates to a broker. Even a broker needs membership with an exchange to trade in it while it needs only one registration with SEBI. In any case, that order is applicable to brokers; not to sub-brokers. Therefore, the AO has not invited any contempt of court. Moreover, the appellant was aware of this legal position and therefore she had made an application for registration before BSE which was subsequently withdrawn. Further, pursuant to amendment to broker regulations in the year 2003 sub brokers were prohibited from handling funds and securities of clients and issuing contract notes to clients. Therefore, there is no laxity in the finding of the AO that the appellant was executing her trades in the capacity as a client and not in the capacity of a sub broker of BSE. 7. We do not find any fault in holding that the appellant has violated provisions of the SE....

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....judice to the provisions of regulation 3, no person shall indulge in a fraudulent or an unfair trade practice in securities. (2) Dealing in securities shall be deemed to be a fraudulent or an unfair trade practice if it involves fraud and may include all or any of the following, namely:- (a) indulging in an act which creates false or misleading appearance of trading in the securities market; (e) any act or omission amounting to manipulation of the price of a security;" 9. Given the above provisions of the SEBI Act and PFUTP Regulations it is evident that the appellant, along with other entities in the Vishvas group have indulged in synchronized and circular trading and contributed substantially in raising the LTP. The exact figures relating to each category of trading and LTP contribution is given in the impugned order. What is disputed by the appellant is that she had no connection with the Vishvas group and synchronization / circularity happened just by chance. However, given the proximity of time between trading by these entities and the number of such instances of trades we are unable to appreciate this submission of the appellant. Further, the con....