Case: 1.SEBI, 2.In Re: Ranbaxy Laboratories Limited Vs 1.BLB Ltd.. Securities and Exchange Board of India
| Judges | V.K. Chopra, Member |
| Issue | Company Law |
| Judgement Date | January 11, 2007 |
| Court | Securities and Exchange Board of India |
Order:
V.K. Chopra, Member
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BACKGROUND
1.1 Securities and Exchange Board of India (hereinafter referred to in short as "the Board") had ordered an investigation into the dealings of M/s BLB Shares and Financial Services Ltd., Brokers of Calcutta Stock Exchange (CSE) (SEBI Registration No. INB030548739 - surrendered the same to CSE), National Stock Exchange (NSE) (SEBI Registration No. INB230642831) and Stock Exchange, Mumbai (BSE) (SEBI Registration No. INB010642837) in the shares of Ranbaxy Laboratories Ltd. (hereinafter referred to in short as "Ranbaxy").
1.2 The price of Ranbaxy scrip moved up significantly from Rs. 270/- in January 1999 to about Rs. 1200/- in October 1999 accompanied with significant increase in volumes. The Board initiated preliminary investigation into the scrip in August 1999 considering the major spurt in price and volumes traded in the Exchanges particularly on the Stock Exchange, Mumbai (BSE), National Stock Exchange (NSE) and Calcutta Stock Exchange (CSE).
1.3 The Board after considering the Investigation Report, appointed an Enquiry Officer vide Order dated November 27, 2002 to enquire into the violations allegedly committed by the Broker under the provisions of Regulation 4(a), (b), (c) and (d) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Markets) Regulations, 1995 (hereinafter referred to in short as "PFUTP Regulations") Regulation 7 of the SEBI (Stock Brokers & Sub-Brokers) Regulations, 1992 read with clause A(3) and (4) of Schedule II of the Code of Conduct for Stock Brokers issued under SEBI (Stock Brokers & Sub-Brokers) Regulations, 1992 (hereinafter referred to in short as "Stock Brokers Regulations") and Rules, Regulations and Bye-laws of Stock Exchanges.
1.4 The Enquiry Officer, after conducting an enquiry in accordance with the provisions of Regulation 6 of the Securities and Exchange Board of India (Procedure for holding Enquiry by Enquiry Officer and imposing penalty) Regulations, 2002 (hereinafter referred to in short as "Enquiry Regulations") submitted a report dated December 23, 2003 wherein he observed that the Broker had violated the provisions of SEBI circular No. SMDRP/POLICY/CIR-32/1999 dated September 14, 1999; Regulation 7 read with clause A(3) and (4) of Code of Conduct as specified in Schedule II of Stock Brokers Regulations and Regulation 4(b) & (c) of PFUTP Regulations. He recommended suspension of registration of the Broker for a period of four months.
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SHOW CAUSE NOTICE
2.1 Pursuant to the receipt of the said Enquiry Report, a Show Cause Notice dated April 28, 2004 was issued to the Broker, enclosing therewith a copy of the said Enquiry Report and advising him to show cause as to why the action as recommended by the Enquiry Officer or any other penalty deemed appropriate should not be imposed on them. The Broker submitted its reply to the show cause notice vide letter dated June 05, 2004.
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REPLY OF THE BROKER TO THE SHOW CAUSE NOTICE
3.1 The Broker in its reply pointed out as follows:
...the total number being a mere 18 out of our around 60,000 at CSE and 1,70,000 overall, and a volume of 3,15,300 shares out of a total volume of over 18,00,00,000 (18 crore) shares at the CSE and over 80,00,00,000 (80 crore) shares in the overall market, spread over a long period of 300 days from 01.01.1999 to 31.10.1999.
... all our said 18 trades, were done in the normal course of our business, and very importantly, through the Price & Order Matching mechanism of the Stock Exchange at the prevailing market prices, within the applicable laws, and making all the compliances related therewith and without any ulterior motives and ill effects corroborating the same.
... definite presence of biases against us probably for reasons that the Enquiry Officer's view was prejudiced by the 2001 market crash, as is evident from the references about KP and his associates, on the basis of just 1 order of 5,000 shares out of our 60,000 amounting to 1,70,00,000 shares, which appears to have the same rate, time and quantity as that of some other Broker who had dealt with and for these entities.
The Investigation was not conducted against us, and our name got included incidentally because our total orders in the scrip were above 1,00,000 shares (orders above 5000 shares considered) during the 300 days period. Had the total of our selected transactions been even 99,999 shares, our name would not have been there.
Our name does not find a mention anywhere in the said extracts, except for in the table of entities, who had total orders of above 1,00,000 shares (orders above 5000 shares considered) during the 10 months period.
The scrip of RLL, belonging to the coveted pharma sector, has been one of the most liquid scrips.
This is conspicuous from the overall volumes in the scrip at the CSE...
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