Case: 1. SEBI, 2. In Re: In The Shares of Classic Global Impex Limited (Now Known as Devine Impex Limited) Vs S.R. Uppal and Co.. Securities and Exchange Board of India

JudgesK.M. Abraham, Member
IssueCompany Law
Judgement DateNovember 30, 2009
CourtSecurities and Exchange Board of India


K.M. Abraham, Member

  1. The Securities and Exchange Board of India (hereinafter referred to as SEBI) had conducted investigations into the dealing in the shares of Classic Global Impex Limited, now known as Devine Impex Limited (hereinafter referred to as the company) for the period 1997-1999 pursuant to an appraisal report from the Income Tax Department in respect of their 'search and seize' operation on June 24, 1999 at the premises of the company, its Managing Director, Mr. Nagesh Agarwal and other related entities including M/s. Neeraj Agarwal & Co. (now known as M/s. Aniket N Agarwal & Co.). The said report of the Income Tax Department mainly focused on ascertaining capital gains/losses engineered by various entities through certain members of The Ludhiana Stock Exchange Limited (hereinafter referred to as LSE) while dealing in the shares of the company. The finding of SEBI revealed that the shares of the company were illiquid at LSE during 1997 to 1999 and that, few stock brokers of LSE including M/s. S.R. Uppal & Co. (hereinafter referred to as the Broker) had contributed significant volumes in the shares of the company. It was found that the shares were shown to have been bought at Rs. 2/- to Rs. 3/- and were then shown to be sold at Rs. 30/- to Rs. 35/-. The said transactions which yielded capital gains were used by the trading clients to set off other losses. The concerned stock brokers including the Broker were alleged to have provided dummy contract notes with distinctive numbers without any trades actually entered into by them, for commission from the clients. It was found that such fictitious contract notes were used by the persons/entities to claim capital gains/losses from the Income Tax Department. On the basis of the findings of the investigation, it was alleged that the Broker had failed to maintain high standards of integrity, promptitude and fairness in the conduct of its business and thereby had prima facie violated Clause A(1) of the Code of Conduct for stock brokers specified under Schedule II of Securities and Exchange Board of India (Stock Brokers and Sub-brokers) Regulations, 1992 (hereinafter referred to as the Stock Brokers Regulations).

  2. In view of the above, an enquiry was initiated by SEBI vide Order dated June 17, 2004 and subsequent Orders dated July 19, 2007, January 30, 2008 and August 7, 2009, against the Broker under the provisions of the Securities and Exchange Board of India (Procedure for...

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