Appeal Nos. 184/185/202 of 2012. Case: 1. Ashesh Agarwal, 2. Sanjeev Agarwal, 3. Big Broker House Stock Ltd. Vs The Adjudicating Officer, Securities and Exchange Board of India. Securities and Exchange Board of India
| Case Number | Appeal Nos. 184/185/202 of 2012 |
| Counsel | For Appellants: Mr. Deepak Dhane, Advocate Mr. Prashant Ingle, Advocate and For Respondents: Mr. Shiraz Rustomjee, Senior Advocate with Mr. Mihir Mody, Mr. Pratham V. Masurekar, Advocates |
| Judges | J. P. Devadhar, Presiding Officer, Jog Singh, Member and A. S. Lamba, Member |
| Issue | Securities and Exchange Board of India Act, 1992 - Sections 15T, 15HA; Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 |
| Judgement Date | August 27, 2013 |
| Court | Securities and Exchange Board of India |
Judgment:
J. P. Devadhar, Presiding Officer (At Mumbai)
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In these three appeals filed under section 15T of the Securities and Exchange Board of India Act, 1992 ('SEBI Act' for short) appellants seek to challenge three orders passed by the Adjudicating Officer of the Securities and Exchange Board of India (hereinafter referred to as the "Respondent") all dated 31st July, 2012. By the said orders all dated 31st July, 2012, penalty amounting to Rs. 7 lac, Rs. 7 lac and Rs. 8 lac has been imposed upon the respective appellants for the offences committed by them under section 15HA of the SEBI Act and Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 ('PFUTP Regulations' for short). Since facts in all these appeals arise from common investigation, all these three appeals are heard together and disposed of by this common judgment.
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During the period 27th March, 2009 to 12th August, 2009 (hereinafter referred to as the 'investigation period') the Respondent noticed that there was sharp rise in price and trading volumes of scrip of Rich Capital and Financial Services Ltd. ('RCFL' for short). Investigation conducted by the Respondent revealed that during the investigation period scrip of RCFL was interalia traded at Bombay Stock Exchange (BSE) for 138 days and that the price of the scrip at BSE opened at Rs. 8.90 on 27th March, 2009 and moved to a high of Rs. 80.15 on 12th August, 2009 and closed at Rs. 73.90 on 12th August, 2009 with average volume of5,258 shares per day.
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On completion of investigation show cause notices were issued to the appellants, calling upon them to show cause, as to why enquiry should not be held against appellants in terms of Rule 4 of the Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by the Adjudicating Officer) Rules, 1995 and penalty should not be imposed under section15HA of SEBI Act for the alleged contravention of the provisions of SEBI Act and PFUTP Regulations. In the show cause notices it was alleged that appellants contributed to new price high, entered into trades at higher price than last traded price of the scrip and also executed reversal/circular trades thereby creating artificial volumes in the scrip of RCFL and manipulated the price of that scrip which led to manipulative, fraudulent and unfair trade in the scrip during the investigation period. In support of the above allegation relevant materials gathered during the course of investigation were also annexed to the show cause notices.
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On receipt of show cause notices, appellants inter alia sought from the Respondent entire copy of the investigation report together with annexures, if any. Respondents in turn informed the appellants that relevant portions of the investigation report has already been furnished to the appellants along with show cause notices and it was open to the appellants to take inspection of the said documents. Appellants however, without filing affidavit-in-reply to the show cause notices, insisted on receiving full enquiry report and sought adjournments from time to time, as and when personal hearing was offered by the Respondent. Ultimately, on 15th February, 2012 appellants were heard and the appellants were directed to file replies to the show cause notices by 10th April, 2012. Accordingly, the appellants filed their replies to the show cause notices within the stipulated time.
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Thereafter Respondent furnished copies of order logs relating to the trades during the investigation period and called upon appellants to offer their comments on the said order logs. In reply, appellants questioned the propriety of furnishingorder logs after granting personal hearing and after replies to the show cause notices were filed by the appellants. Appellants further submitted that neither documents annexed to the show cause notices nor order logs furnished belatedly contain any evidence to establish the charges leveled against appellants and hence the impugned orders are liable to be...
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