Appeal No.30 of 2013. Case: 1. Ramswarup Sarda, 2. Ramswarup Sarda HUF Vs Securities and Exchange Board of India. Securities and Exchange Board of India
| Case Number | Appeal No.30 of 2013 |
| Counsel | For Appellants: Mr. N.P. Lashkari, Advocate with Mr. Manish Chhangani, Advocate and For Respondents: Dr. Mrs. Poornima Advani, Advocate with Mr. Ajay Khaire and Ms. Virakthi Hegde, 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 19, 11(4) & 11B; Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 - Regulations 3(a), 3(b), 3(c), 3(d) and 4(1) and 4(2)(a)(b)(g) |
| Judgement Date | July 23, 2013 |
| Court | Securities and Exchange Board of India |
Judgment:
J.P. Devadhar, Presiding Officer
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In the present Appeal, Appellant No. 1, namely, Ramswarup Sarda, is an individual investor in the securities market. He is also the Karta of his Hindu Undivided Family which is Appellant No.2. He is contesting an order dated May 11, 2012 passed by the Securities and Exchange Board of India ("SEBI") restraining him, along with some others, from accessing the securities market and prohibiting him from buying, selling or otherwise dealing in securities, directly or indirectly, for a period of two years under Sections 19, 11(4) & 11B of the Securities and Exchange Board of India Act, 1992 read with Regulations 3(a), 3(b), 3(c), 3(d) and 4(1) and 4(2)(a), (b) and (g) of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 ("FUTP Regulations").
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Appellant No. 1 submits that he has an impeccable track record in terms of compliance with various laws related to securities and he is a routine and genuine investor in securities. He has no link with the promoters or any of the parties mentioned in the impugned order. His case is that he purchased 50,000 (Fifty Thousand) shares of Alka Securities Ltd. ("the Company") in an auction held by the Dena Bank as a long term investment and has never dealt with or transferred or disposed of those shares till date.
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It appears from the pleadings that the Respondent observed a spurt in the volumes of the scrip of the Company during November, 2008 to March, 2009. Investigation was, accordingly, conducted and it was prima-facie observed that the closing price of the scrip had been Rs.32.45 in September, 2008 to begin with and it reached a high of Rs.35.05 in the same month with some fluctuations thereafter. It reached to Rs.32 in May, 2009. The Respondent, therefore, passed an ex parte order on July 28, 2009 prohibiting the Appellant, along with many others, from buying, selling or dealing in the securities of the Company till further orders. The basic presumption on which the interim order came to be passed seems to be that the promoters of the Company along with some other persons indulged in manipulative trades with the idea of creating artificial volumes so as to give a wrong impression about the liquidity of the scrip. On October 30, 2009 the said interim order came to be confirmed by the Respondent and a Show Cause Notice (SCN) dated December 27, 2010 was issued to several entities, including the Appellants, calling upon them to furnish their reply in the matter of alleged circular trades which had created artificial volumes enhancing image of the scrip in the public eye. After considering the explanations/replies offered by various parties including the Appellant, the final impugned order came to be passed on May 11, 2012 restraining the Appellants and a few others from dealing in securities for two years. The learned counsel for the Appellant, Mr. Lashkari, has submitted that the Appellant is an innocent and bonafide investor. He purchased the shares in question from Dena Bank and directly made the payment to the same bank. The shares of the Company were pledged with the bank and therefore the ownership had remained with the promoter Ms.Dimple M. Kothari. It is further forcefully argued that the Appellant had no intention of trading in the scrip as it was a long term investment. From November,2008 till July 28, 2009, when the interim order was passed by the Respondent, the Appellant had almost ten...
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