Misc. Application No. 94 of 2013 and Appeal No. 217 of 2012. Case: R.R. Chokhani Stock Brokers Pvt. Ltd. Vs Securities and Exchange Board of India. Securities and Exchange Board of India

Case NumberMisc. Application No. 94 of 2013 and Appeal No. 217 of 2012
CounselFor Appellant: Mr. Zal Andhyarujina, Advocate, Mr. Atul Singh and Mr. Maneck Andhyarujina, Advocates and For Respondents: Mr. Shiraz Rustomjee, Senior Advocate, Mr. Mihir Mody and Mr. Pratham V. Masurekar, Advocates
JudgesJ.P. Devadhar, J. (Presiding Officer), Jog Singh and A.S. Lamba, Members
IssueSecurities and Exchange Board of India Act
Judgement DateSeptember 25, 2013
CourtSecurities and Exchange Board of India


Jog Singh, Member

  1. The present appeal arises out of order dated September 28, 2012 passed by the adjudicating officer imposing a penalty of ` 5,00,000/- for violating Clauses A(2) and A(5) of Schedule II prescribed under Regulation 7 of the Securities and Exchange Board of India (Stock Broker and Sub-broker) Regulations, 1992 ('Stockbroker Regulations' for short) read with Circular dated August 27, 2003 issued by the Respondent. Securities and Exchange Board of India ('SEBF for short) conducted an investigation into the affairs of Bank of Rajasthan Ltd. ("BOR") during the period June 2007 to December 2009. The investigation revealed that shareholding of the promoters of BOR with their PACs had increased from 46.80% in June 2007 to 63.15% in December 2009. Promoters alongwith their PACs increased their shareholdings by way of acquiring shares from the security market. It was also observed that certain brokers, including R.R. Chokhani Stock Brokers Pvt. Ltd. ('Appellant' for short), traded for some clients who were related to the promoters of BOR and received payment for the trades from third parties, which is specifically prohibited by SEBI vide Circular dated August 27, 2003.

  2. The appellant prays for the following reliefs:

    1. This Hon'ble Tribunal be pleased to set aside the Impugned order bearing Order No. BM/AO-52/2012 dated 28th September 2012 passed by the Adjudicating Officer.

    2. Appellant prays that the Hon'ble Tribunal be pleased to declare that the penalty imposed on the Appellant is arbitrary, unjustified, and disproportionately high vis a vis the alleged offence and that the Hon'ble Tribunal be further pleased to drastically reduce and/or conditionally pardon the Appellant from the penalty imposed by the Impugned Order.

    3. For Ad-interim and Interim Relief in terms of prayer (i) and (ii).

    4. For any other order that the Hon'ble Tribunal may deem fit in the facts and circumstances of the given case.

    5. For Costs.

  3. Briefly stated the facts of the case are that in years 2007 and 2008 the Appellant accepted payments from third parties i.e. other than clients, in respect of certain trades undertaken by it, on behalf of a few clients. The details have been reproduced by the Appellant in para 5(c) of the appeal. Acceptance of payment from third parties through cheques instead of from clients through account payer cheques drawn by the client, was found objectionable by the Bombay Stock Exchange ("BSE") and as such an investigation regarding this affair was conducted by BSE in July-August 2010. After completion of the investigation, and obtaining reply from the Appellant regarding the investigation report and perusal of the same, BSE directed the Appellant to comply with...

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