BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Date of Decision: 08.08.2019
Appeal No. 354 of 2019
Geojit Financial Services Limited
34/659-P, Civil Line Road,
Padivattom, Kochi,
Kerala- 682 024
…Appellant
Versus
Securities and Exchange Board of India,
SEBI Bhavan, Plot No. C-4A, G-Block,
Bandra-Kurla Complex, Bandra (East),
Mumbai-400 051
…Respondent
Mr. Rajesh Nagory, Advocate with Ms. Sabeena Mahadik and
Mr. Pankaj Uttaradhi and Mr. Sagar Hate, Advocates i/b
Vishesha Law Services for the Appellant.
Mr. Vishal Kanade, Advocate with Ms. Faiza Dhanani and
Mr. Chirag Bhavsar, Advocates i/b MDP & Partners for the
Respondent.

CORAM: Justice Tarun Agarwala, Presiding Officer
Dr. C.K.G. Nair, Member
Justice M. T. Joshi, Judicial Member
Per: Justice Tarun Agarwala (Oral)
1.

An inspection of the books of accounts of the appellant
who is the broker was conducted for the Financial Year 20132014 and 2014-2015 to examine whether the broker had made
compliance of various regulatory norms prescribed by Securities
2
and Exchange Board of India (“SEBI” for convenience).
During the inspection it was found that various SEBI Circulars
and Regulations were not followed. On this basis, a show cause
notice was issued to show cause as to why penalty should not be
imposed. The appellant filed its reply, based on which, after
giving an opportunity of hearing, the impugned order was
passed by the Adjudicating Officer (“AO” for convenience)
imposing a penalty of ` 5 lakhs under Section 15C of the SEBI
Act, and Section 23C of the Securities Contracts (Regulation)
Act, 1956 (“SCRA” for convenience) and another sum of ` 25
lakhs under Section 15HB of the SEBI Act and Section 23H of
the SCRA.

2.

The appellant being aggrieved by the aforesaid penalty has
filed the present appeal. We have heard Shri Rajesh Nagory the
learned counsel for the appellant and Shri Vishal Kanade the
learned counsel for the respondent. At the outset, the learned
counsel for the appellant submitted that admittedly the appellant
had violated some of the Circulars issued by SEBI but contends
that the violation was not such which would lead to imposition
of such a heavy amount of penalty. The learned counsel thus
contended that in the given circumstances when the alleged
violation of subsequently rectified immediately after the
3
violation was pointed out during the course of investigation the
penalty
should
be
reduced
considering
the
mitigating
circumstances.

3.

In the light of the aforesaid submission the present appeal
is being disposed off at the admission stage without calling for a
reply from the respondent since no factual controversy is
involved.

4.

The appellant has been penalized a sum of ` 5 lakhs for
non-redressal of the investors complaint on the SCORES
platform within the stipulated period of 30 days. It was found
that during the period in question out of 23 complaints 18 of the
complaints were redressed within time and the remaining five
were redressed within the time ranging from 32 to 41 days after
receipt of the complaints. The AO found that apparently there
has been a violation of Regulation 9(e) of the SEBI (Stock
Brokers and Sub-Brokers) Regulations, 1992 (“Brokers
Regulations” for convenience). We however observe that in the
5 instances the delay is not huge and the grievance was
redressed at the earliest opportune moment within 15 days of
the expiry of the period. It is not a case where the complaints
4
were not redressed but is a case where there has been a small
delay in the disposal of the complaint.

5.

It was found that the appellant was not settling the
accounts of the clients and was retaining the amount of
` 10,000/-. The contention of the appellant was that they are
taken consent from the clients to retain the amount. The AO
however, has found that no such consent was placed before the
AO and therefore gave a categorical finding and that the
appellant had violated the Circular.

This retention of the
amount of ` 10,000/- was done away by the appellant
immediately after it was pointed out during the investigation.

6.

In the third instance, we find that the appellant was not
settling the client’s account where the amount was less than
` 1,000/-. The reason submitted by the appellant was that in
many cases the bank clearing charges were higher than the
payout made.

The investors became upset and therefore
considering the administrative inconvenience the appellant
decided not to settle the funds which were upto ` 1,000/- It was
also stated that after this irregularity was pointed out in the
inspection, the same was cured and the amount has been paid to
the clients. We however find that the total amount involved
5
which the appellant had retained ranged from ` 43 lakhs to ` 83
lakhs.

7.

The AO further found that the appellant was not settling
the inactive clients and the reason submitted by the appellant
was that the accounts could not be settled in as much as the
legal heirs of the deceased client had not furnished the requisite
documents. As a result, the money had been kept in clients
Fixed Deposit (“FD”) on the basis of the advice given by the
National Stock Exchange of India Limited (NSE). The AO did
not accept this contention on the ground that the advisory note
of NSE was not placed before the AO.

8.

Having regard to the aforesaid violations, we find that this
was the first time violation which was pointed out in the
inspection. Such violation had not occurred earlier. Further, the
appellant has 84,000 clients and there is no complaint from any
client with regard to the retention of the aforesaid amount or
non-settlement of the clients account. Further, we find that the
retention of ` 10,000 of the clients has been paid out and even
the amount less than ` 1000/- has also been cleared. We are
also of the opinion that the submission raised by the appellant
with regard to non-settlement of the clients who had died has
6
not been disbelieved nor the AO has given any finding that the
appellant had not made the FD of the clients who had died.

9.

In the light of the aforesaid considerations, we are of the
opinion that the penalty of ` 30 lakhs in the circumstances of
the case is high and unjustified. Considering the mitigating
circumstance that the violation was not deliberate and the same
was rectified when pointed out coupled with the fact that the
amounts of the deceased client has been kept in the FD which
has not been disputed we feel that for the said violations the
quantum of penalty in the interest of justice should be reduced.
Considering
the
aforesaid
factors
and
the
mitigating
circumstances, we reduce the amount of penalty from ` 30 lakhs
to ` 15 lakhs. The appeal is partly allowed and the impugned
order is accordingly modified to the extent stated aforesaid.

Sd/Justice Tarun Agarwala
Presiding Officer
Sd/Dr. C.K.G. Nair
Member
Sd/Justice M. T. Joshi
Judicial Member
08.08.2019
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