Appeal No. 25 of 2013. Case: Angel Broking Private Limited Vs Securities and Exchange Board of India. Securities and Exchange Board of India
| Case Number | Appeal No. 25 of 2013 |
| Counsel | For Appellant: Mr. Somasekhar Sundaresan, Mr. Ravichandra S. Hegde and Mr. Joby Mathew, Advocates and For Respondents: Mr. Kumar Desai, Mr. Mihir Mody and Mr. Pratham Masurekar, Advocates |
| Judges | J.P. Devadhar, J. (Presiding Officer), Jog Singh and A.S. Lamba, Members |
| Issue | Securities and Exchange Board of India Act |
| Judgement Date | October 22, 2013 |
| Court | Securities and Exchange Board of India |
Judgment:
J.P. Devadhar, J. (Presiding Officer)
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Appellant has filed this appeal to challenge order passed by Whole Time Member of the Securities and Exchange Board of India ('SEBI' for short) on January 30, 2013. By that order, appellant is prohibited from taking up any new assignment (i.e. not to take up any new clients) for a period of two weeks. Appellant is a SEBI registered stock broker and has been carrying on the activities of stock broking since 1997 on the Bombay Stock Exchange Limited as well as the National Stock Exchange of India Limited.
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SEBI conducted investigation into dealings in the scrip of Sun Infoway Limited ('SIL' for short) during February 5, 2001 to May 2, 2001 ('investigation period' for short). During the period of investigation, there was consistent fall in price of the scrip of SIL accompanied by low delivery. Price of SIL scrip had fallen from Rs. 342/- as on February 5, 2001 to a low of Rs. 60.75 as on April 30, 2001 before finally closing at Rs. 73.75 on May 2, 2001. SEBI had also conducted investigation in the scrip of SIL, for the period from February 2000 to August 2000. During that period of investigation it was noticed that price of the scrip had increased from Rs. 10/- in February 2000 to Rs. 696/- in August 2000 and appropriate action was initiated against various persons/entities involved in dealing in scrip therein, including appellant.
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Based on investigation report for the period February 5, 2001 to May 2, 2001, enquiry officer appointed by SEBI issued notice on June 18, 2008 calling upon appellant to show cause as to why trades executed by appellant on behalf of its client Mr. Heerachand Salecha in the scrip of SIL which were synchronized circular trades and executed between a set group, should not be held to be violative of Regulation 4(a) and (d) of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995 ('PFUTP Regulations, 1995' for short) read with Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 ('PFUTP Regulations, 2003' for short) and Clauses A(1) and A(5) of the Code of Conduct prescribed for stock brokers in Schedule II under Regulation 7 of the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992 ('Stock Brokers Regulations' for short). Appellant in its reply denied all allegations made in the show cause notice. After hearing appellant, enquiry officer vide enquiry report dated May 31, 2010, recommended that in view of violations of PFUTP Regulations, 1995 and Stock Brokers Regulations, appellant be restrained from taking up any new clients for one week.
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On July 22, 2010, Designated Authority appointed by SEBI issued show cause notice under Regulation 28 of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008 ('Intermediaries Regulations' for short) calling upon appellant to show cause as to why penalty should not be imposed upon appellant as per enquiry report submitted by enquiry officer or as deemed fit by the Board. Appellant in its reply denied all allegations made in the said show cause notice dated July 22, 2010. Personal hearing was given to appellant on October 22, 2010. Thereafter addendum to show cause notice was issued on January 3, 2012. Appellant once again denied allegations made in the addendum. Personal hearing was once again granted to appellant. Thereafter by impugned order dated January 30, 2013, appellant has been prohibited from taking up any new assignments (i.e. not to take up any new clients) for two weeks. Impugning above order dated January 30, 2013 present appeal is filed.
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Arguments advanced by Mr. Somashekar Sundaresan, learned counsel for appellant may be summarized thus:-
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Impugned order is violative of principles of natural justice as neither entire investigation report which formed basis for passing impugned...
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