TaxTMI 
TaxTMI 
2023 (7) TMI 1604
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.... Mr. Shiraz Rustomjee, Senior Advocate with Mr. Rashid Boatwalla, Ms. Samiksha Rajput, Mr. Juan D'Souza, Advocates i/b MKA & Co. for the Respondent Nos. 2 (NSE). Mr. Tomu Francis, Advocate with Ms. Zarnaab Aswad, Advocate i/b Khaitan & Co for the Respondent No. 3 (BSE). None for the Respondent Nos. 4 (Balance Equity Broking). ORDER Per : Justice Tarun Agarwala, Presiding Officer 1. The appellant has challenged the order dated February 21, 2022 where by the claim relating to refund of the margin money was rejected. 2. The facts leading to the filing of the appeal is, that Balance Equity Broking [India] Pvt. Ltd. respondent nos. 4 is a broker and is registered as a trading member with National Stock Exchange of India Ltd. ....
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....s passed. While all these proceedings were going on, the appellant has received Rs. 8 crore in the form of securities and out of Rs. 13.64 crore which was deposited as a margin money in cash has received Rs. 9.98 crore and only a balance amount of Rs. 3.66 crore is payable as margin money. 6. We have heard Ms. Sonal, the learned counsel with Mr. Vivek M. Sharma, the learned counsel for the appellant and Mr. Sumit Rai, the learned counsel with Mr. Mihir Mody, Mr. Arnav Misra, Mr. Harshvardhan Melanta, the learned counsel for the respondent nos. 1 SEBI and Mr. Shiraz Rustomjee, the learned senior counsel with Mr. Rashid Boatwalla, Ms. Samiksha Rajput, Mr. Juan D'Souza, the learned counsel for the respondent nos. 2 NSE and Mr. Tomu Francis,....
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....Clearing Member 5.81 Bank balance available with the Trading Member 0.72 Total 10.43 9. The respondents have also stated as on September 30, 2020, the amount payable was Rs. 19.96 crore to the clients of the broker and, therefore, there was a shortfall of Rs. 9.53 crore. It was further stated that NSE had supervised the realization of funds of Rs. 16,03,33,018.83 by way of liquidation of deposits, funds available with other Market Infrastructure Institutions, the Clearing Member after deducting dues payable to them along with further amounts infused by the broker and such funds were utilized to clear the dues of 125 credit balance clients. It was also stated by NSE that during the said process, it supervised the payment of....
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....ding to a default, the stock exchange is obliged to initiate proceedings to declare the trading member as a defaulter under Chapter XII of the Bye-laws. But under Clause 8 of Chapter VII of the bye-laws, SEBI can issue circulars indicating the SOP to be followed by the stock exchange where a trading member is leading toward a default and, in accordance with the SOP, the stock exchange is required to issue instructions to the banks to freeze the bank accounts, etc. 12. Based on Clause 8 of Chapter VII of the Bye-laws, SEBI issued SOP dated July 1, 2020. The SOP was made in order to protect the interest of the non-defaulting clients of a trading member and the stock exchanges were required to take steps against the trading member who is li....
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....l not be considered for settlement, for which the TM shall provide an undertaking to the SEs / CC. TM to provide indemnity to the SEs to make available the funds to meet any shortfall in meeting investor's claim (other than those who have withdrawn their claim). Clients withdrawing their claim will have to submit unconditional withdrawal letter to the Ses. Within 30 trading days from crystallization of balances 13. The aforesaid provision indicates that the trading member was required to pay small investors out of available funds and whole resources including the unencumbered deposits available with the stock exchange and the clearing corporations. The procedure for paying the small investors as per the Clause 4.25 was subsequently am....
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....nal. 17. Prima-facie, we are satisfied that the appellant has received the amount as per the paragraph no. 4.25 of the circular of the SOP dated July 1, 2020 and May 27, 2022. 18. In view of the aforesaid, we are unable to appreciate the submission of the learned counsel for the appellant that money were paid to the other clients of the broker from the margin money of the appellant. This assertion of the appellant is incorrect in as much we find that NSE had supervised the realisation of the funds to the tune of Rs. 16.83 crore by way of liquidation of deposits, funds available with other Market Infrastructure Institutions, the Clearing Members and some amount infused by the broker. We are satisfied that the margin money of the appell....