Case: 1. SEBI, 2. In Re: Shares of Radiant Financial Services Limited Vs S. Jhunjhunwala and Co.. Securities and Exchange Board of India
| Judges | K.M. Abraham, Member |
| Issue | Company Law |
| Judgement Date | December 14, 2009 |
| Court | Securities and Exchange Board of India |
Order:
K.M. Abraham, Member
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It was brought to the notice of Securities and Exchange Board of India (hereinafter referred to as SEBI) that shares of some illiquid companies listed at Calcutta Stock Exchange Association Limited (hereinafter referred to as CSE) were traded in a circuitous route among certain members of a group operating collusively and the same were later on sold at highly inflated prices during the period January 1, 2004 to February 28, 2005 (hereinafter referred to as the investigation period). Thereafter, SEBI initiated investigation into the dealings in the shares of such companies which included Radiant Financial Services Limited (hereinafter referred to as the company). The investigation conducted by SEBI inter alia observed that the share price of the company had witnessed a sharp rise between January 1, 2004 and February 28, 2005. The average price of the shares of the company was Rs. 1.95/- on February 16, 2004 which went up to Rs. 225/- on February 25, 2005, an increase of 11,438%. It was noticed that the stock brokers viz. M/s Dinesh Kumar Lodha, Subh Stock Broking Private Limited, M/s S. Jhunjhunwala & Co. (hereinafter referred to as the Broker) and M/s Deepak Jhunjhunwala & Co. had traded substantially in the shares of the company and that their cumulative trades accounted for 98.23% of the total (buy and sell) transactions in the said shares at CSE during the investigation period. It was alleged that the transactions of the Broker were inter alia designed to create false and misleading appearance of trading in the shares of the company and that it was alleged to have contravened the provisions of Regulations 4(2)(a), 4(2)(e) and 4(2)(o) of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (hereinafter referred to as the PFUTP Regulations) and clauses A(1), A(2), A(3), A(4) and B(4)(a) of the Code of Conduct prescribed for stock brokers under Schedule II of the Securities and Exchange Board of India (Stock Brokers and Sub-brokers) Regulations, 1992 (hereinafter referred to as the Broker Regulations). Thereafter, SEBI, vide order dated November 12, 2007 appointed an Enquiry Officer under the provisions of Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 (since repealed) to enquire into the alleged violations committed by the Broker. The Enquiry Officer/Designated Authority (hereinafter referred to as the Enquiry Officer) submitted the Report dated August 24, 2009 under the provisions of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008 and found the Broker guilty of contravening Regulation 4(2)(o) of the PFUTP Regulations and Clauses A(2) and B(4)(a) of the Code of Conduct prescribed for stock brokers under Schedule II of the Broker Regulations. The Enquiry Officer recommended the suspension of the certificate of registration of the Broker for a period of one month. Pursuant to the submission of the Enquiry Report, SEBI issued a notice dated August 28, 2009, to the Broker advising it to show cause notice as to why the penalty as recommended by the Enquiry Officer or as considered appropriate by SEBI should not be imposed against it. A copy of the Enquiry Report was also forwarded to the Broker with the said show cause notice. The Broker was also advised to inform SEBI, whether he desired to avail an opportunity of hearing. As SEBI had not received any response from the Broker, SEBI provided another opportunity to the Broker, vide letter dated October 14, 2009. Thereafter, vide letter October 20, 2009, the Broker inter alia stated that it had been suspended and debarred from the securities market for a period of 35 months from September 29, 2005 to August 11, 2008. In view of the above, the Broker requested SEBI to 'forgo and set aside the suspension period of one month....'. Though, the Broker was advised to indicate whether it sought for a personal hearing, no response in that regard was made by it. In view of the...
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