BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Appeal No.122 of 2012
Date of Decision: 8.11.2012
Bharat Shantilal Thakkar
196/A, Dr. Viegas Street,
Carvel X Lane No.8,
3rd
Chirabazar, Mumbai – 400 002.
Floor, Room No.32,
…… Appellant Versus
The Adjudicating Officer
Securities and Exchange Board of India
SEBI Bhavan, Plot No. C-4A, G Block,
Bandra Kurla Complex, Bandra (East),
Mumbai – 400 051.
…… Respondent Mr. Ankit Lohia, Advocate with Mr. Manish Chhangani, Advocate for the Appellant.
Dr. Mrs. Poornima Advani , Advocate with Mr. Mobin Shaikh, Advocate for the
Respondent.
CORAM : P. K. Malhotra, Member & Presiding Officer (Offg.)
S.S.N. Moorthy, Member
Per : S.S.N. Moorthy
This order will dispose of five Appeals no.122, 123, 127, 128 and 129. Since the
facts of the case are identical in all the appeals a single order is passed taking out the facts
from Appeal no. 122 of 2012 filed by Shri Bharat Shantilal Thakkar. The appellants are
investors in securities and had been dealing in securities market for the past several years.
The present appeals arise out of orders passed by the adjudicating officer of Securities
and Exchange Board of India (the Board) in the case of the appellants. The adjudicating
officer, acting under section 15I of the Securities and Exchange Board of India Act, 1992
(the Act), imposed penalties as enumerated hereunder in respect of the appellants.
1) Shri Bharat Shantilal Thakkar [Appeal no.122 of 2012] – 3,50,000/- 2) Shri Kishore Balubhai Chauhan [Appeal no.123 of 2012] - 3,50,000/-
3) Shri Hemant Madhusudan Sheth [Appeal no.127 of 2012] – 3,50,000/- 4) Shri Prem Mohanlal Parikh [Appeal no.128 of 2012] - 3,50,000/-
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5) Shri Bhavesh P. Pabari [Appeal no.129 of 2012] – ` 3,50,000/-
- The adjudicating officer, acting under the powers conferred under section 23 I of
the Securities Contracts (Regulation) Act, 1956 (SCRA) , imposed penalties on the
appellants as enumerated below:-
1) Shri Bharat Shantilal Thakkar [Appeal no.122 of 2012] –1,50,000/- 2) Shri Kishore Balubhai Chauhan [Appeal no.123 of 2012] -1,50,000/-
3) Shri Hemant Madhusudan Sheth [Appeal no.127 of 2012] –2,00,000/- 4) Shri Prem Mohanlal Parikh [Appeal no.128 of 2012] -2,00,000/-
5) Shri Bhavesh P. Pabari [Appeal no.129 of 2012] – ` 3,00,000/- - The appellants were held to be guilty of violating section 11C of the Act and
hence penalty under section 15A( a) was imposed as mentioned above. Similarly, the
appellants were found to be guilty of violating sections 13 and 18 read with section 2(i)
of the SCRA and penalty was imposed under section 23H of the SCRA as mentioned
above. The appellants challenge the imposition of the above penalties in these appeals. - The brief facts , leading to the imposition of penalties , are the following. The
Board conducted investigation in the trading in the scrip of M/s. Indo Pacific Software
and Entertainment Ltd. engaged in the business of providing software development,
entertainment activities, development of multiplexes etc. The investigations revealed that
ten entities transferred/ received shares in off-market transactions in respect of 70,78,108
shares. Investigation was conducted into the nature of the off market transactions and the
appellant was directed to explain the circumstances leading to the off market trans fers.
The appellant contended before the investigatin g authority and the adjudicating officer
that the off market transfers were in the nature of repayment of old loans, advancement of
new loans or transactions between his own demat accounts. The investigating authority
called for specific details regarding the alleged off market transfers. Notices were issued
to the appellants s etting forth specific details for explaining the nature of the impugned
transactions. When complete and convincing reply was not received from the appellant ,
summons w as issued encl osing specific details to be furnished and for personal
appearance of the appellant. After a series of such correspondence the investig ating
officer concluded that the queries raised during the investigation were not answered fully
by the appellant and there was default in responding to the summons issued by the
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authorities. He concluded that there was violation of the provisions of section 11C of the
Act in as much as the appellant had failed to appear as directed and fail ed to provide the
required information as per summons issued. It was also noticed by him that the
appellant failed to furnish evidence for the off market transfers as contended by him and
so the exact purpose and modus operandi of the off market trans fers could not be
established. It was noted that the appellant failed to furnish evidence as promised in the
replies to the summons to establish the claim that off market transfers were in the nature
of loan repayment/fresh loan. There was no evidence for payment of consideration as
well. In view of the failure to furnish the above mentioned evidence in support of the off
market deals, the adjudicating officer concluded that there was violation of the provisions
of sections 13 and 18 read with section 2( i) of the SCR A. A show cause notice was
issued to the appellant setting out the above allegations on July 4, 2011 and after
considering the submissions of the appellant the adjudicating officer imposed penalties as
mentioned above by way of an order dated February 29, 2012.
- We have heard learned counsel Mr. Vicky Singh for Bhavesh P. Pabari and Mr.
Ankit Lohia for Bharat Shantilal Thakkar and others and Dr. (Mrs) Poornima Advani for
the respondent Board. - The first objection in this appeal relates to imposition of penalty under secti on
11C of the Act for non response/non furnishing of information as per summons issued. It
is the case of the appellant that replies were furnished to the letters issued by the
investigating authority and the adjudicat ing officer and extension of time for filing
specific particulars was sought from time to time and the appellant cannot be charged
with non response to summons. In the grounds of appeal it is submitted in detail that the
appellant had informed the respond ent Board that the off market transfers w ere in the
nature of short term loans and repayment of old dues and the appellant had only business
relations with the entities involved in the transaction. According to the grounds of
appeal, the appellant had submitted all the details called for and he had extended full
cooperation and there was no default in furnishing any report, document or information.
It is specifically submitted that the appellant did not have any document in support of the
off market transactions, there was no bank transaction and in this background the issue of
non furnishing of any document does not arise. According to the appellant, the
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transactions were made on the basis of good faith and market goodwill and hence there
was no supporting document. It is also contended by the appellants ’ learned counsel that
the show cause notice has mainly alleged non appearance before the adjudicating officer
whereas the penalty imposed under section 15 A(a) deals with non furnishing of
documents, information and reports to the Board.
- The learned counsel appearing for the Board took us through the letters and
summons issued by the investigating and adjudicating authorities and submitted that the
appellants had failed to furnish specific information as called for in the summons. The
appellant had repeatedly sought extension of time for filing specific particulars since they
had to be collected and collated from various sources and promised to furnish the same
after the extended time sough t for. According to the learned counsel for the Board, the
appellant has taken dilatory tactics without answering the specific queries and there was
clear violation on his part and so the provisions of section 11C stand attracted. - We have considered th e rival submission s. It is necessary to have a look at the
factual matrix of the case for a proper appreciation of the contentions raised by both the
parties. On August 3, 2009, assistant general manager of the investigation department of
the Board issue d a letter to the appellant calling for certain details with reference to the
off market transactions entered into by the appellant. The details mainly related to
reasons for entering into the said transactions, relationship with the parties , details of
payments made/received, details of bank statement, disclosures made as per regulation 13
of the Securities and Exchange Board of India (Prohibition of Insider Trading).
Regulations, 1992 (PIT Regulations) etc. A reminder was issued to the appellant on
August 17, 2009 to expedite the reply. The appellant submitted a reply to the above
queries on September 22, 2009. Since the investigating authority required further
particulars regarding the impugned transacti ons a summons was issued to the appellant
on June 8, 2010. The appellant was directed to furnish documentary evidence in support
of the off market transactions, explain the relationship with the counter parties, file
details of payments, furnish copies of bank statement etc. The appellant furnished a reply
on January 15, 2010 reiterating the stand already taken in reply to the first letter of the
investigating officer. The main submission of the appellant was that the impugned
transactions rel ated to temporary loans/ loan repayment in the form of shares. The
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investigating authority issued another summons on June 7, 2010 calling for details of the
alleged loan transactions and supporting documents in respect of the same. The appellant
filed a reply on July 1, 2010 seeking more time to locate necessary documents in support
of the loan transactions since the said transactions took place more than three years ago.
On July 17, 2010 the appellant intimated the investigating officer that he required fifteen
more days to submit the required particulars since he could not locate the requisite details
and the process was likely to take some more time. After this letter , there was a long
silence on the part of the appellant. The adjudicating officer issued a s how cause notice
on July 4, 2011.
- For proper appreciation of the contentions raised by the appellant , it is necessary
to focus on the submissions made by him on July 1, 2010 and July 17, 2010. For ease of
reference the relevant portions are extracted below.
“With regard to query no.2, I request you to grant me sometime to submit
the necessary documents since it pertains to the financial transactions
taken place during the period which is more than three years from now
and therefore I require some more time to locate the same.
…………………………..
As far as Query no.2 is concerned, through the said reply I had sought
some time to provide information and relevant documents. However, I
have still not been able to locate the requisite details, the process is lik ely
to take some time.
In view of the same I request you to kindly give me 15 more days time to
submit the required details and hence request you to treat the same as
compliance of the captioned summons and I further request that on
submission of the details I be exempted me from personal appearance. ” - The tone and tenor of the above submissions suggests that the appellant is in
possession of the required details and more time is required for locating and submitting
the same to the investigating officer. Admittedly, the appellant has not furnished the
requisite particulars as per his own admission till July 17, 2010. Summons are issued for
eliciting necessary information in respect of certain cases under investigation and if the
details called for are not furnished, in spite of the issue of summons , the appellant has to
be held guilty. The learned counsel appearing for Shri Bhavesh P. Pabari sub mitted that
there was substantial compliance to the summons and all the material in possession of the
appellant was submitted. This cannot be accepted in the face of the very admission of the
appellant mentioned hereinabove that fifteen more days time should be granted to submit
the required details. It is also to be noticed that the appellant had sought exemption from
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personal appearance on submission of the required details. When required details were
not furnished by the appellant and he has himself a dmitted that the same would be filed
within the extended time , the theory o f substantial compliance advanced by the
appellants’ learned counsel cannot be accepted.
- There is no material on record to show that the request of the appellant was turned
down. On the other hand, the investigating authorities were under the impression that
the required particulars w ould be furnished within the extended time sought for by the
appellant. In fact , the appellant had a long interregnum before the issue of the show
cause notice, but the appellant failed to comply with the commitment given in response to
the summons. - In the grounds of appeal , the appellant has taken a stand that all details required
by the investigating officer were furnished and he had ex tended full co- operation
necessary in the matter. It is also submitted that the Board failed to appreciate that the
appellant had no documents in his possession in relation to the impugned transactions
and, therefore, the issue of non furnishing of docume nts is of no consequence. This
argument of the appellant goes counter to the stand taken in the replies furnished in
response to the summons issued by the investigating officer , reference to which has been
made above. There is no whisper in the replies filed before the investigating officer that
the appellant was not in possession of the required details. On the contrary , the
commitment by the appellant was for submission of th e documents within the extended
period of time. It is noteworthy that the appellant himself has stated in the reply filed on
July 17, 2010 that exemption from personal appearance may be granted on submission of
the required details. - The above analysis of the facts on record shows that the appellant was guilty of
non appearance before the investigating officer in response to the summons and guilty of
non furnishing of details as called for. We are of the view that shorn of all technical
arguments relating to the provisions of section 11C of the Act , the factual conceptus of
the case narrated above would be sufficient to hold the appellant guilty. - The appellant’s learned counsel argued at length to drive home a proposition that
penalty under section 15A(a) cannot be imposed for violation of section 11(C) of the Act.
According to him, the provisions of section 11(C)(6) provide for penalty for violation of
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section 11(C) of the Act and so the general provisions contained in section 15A(a) of the
Act cannot be invoked.
- We cannot accept the above contenti on of the appellant’s learned counsel. It is
not necessary to discuss the nuances of section 11(C)(6) and section 15A(a) for
considering the issue at hand. The issue has been considered by this Tribunal in the case
of DKG Buildcon Pvt. Limited vs. Securities and Exchange Board of India , [Appeal
no.106 of 2006 decided on January 7, 2009]. The adjudicating officer has highlighted the
decision of this Tribunal in the above case and also the salient portions of the order.
Suffice it to say that the provisions of section 11(C)(3) empower the investigating
authority to call for relevant in formation for the purpose of investigation and the
provisions of section 15 A(a) deal with penalties for failure to furnish any document or
return to the Board. In order to advance the objective of the enactment the provisions
have to be given a wider meaning and viewed from this angle, provisions of section
15A(a) can be invoked for failure to furnish information/document/returns as called for
by the investigating authority. The relevant portion of the observation of this Tribunal in
the above case is extracted below.
“Section 11C of the Act was introduced with effect from 29.10.2002 and
sub-section (3) thereof provides that the investigating authority may require
any person associated with the securities market “to furnish such
information, or produce such books, or registers, or other documents, or
record before him…”. The powe r to require a person to furnish any
information or record or documents includes the power to require such
person to make a statement and give clarifications with regard to the
information and documents produced by him. In the absence of such a
power the purpose of the legislature in introducing section 11C would be
frustrated and the Board will not be able to investigate properly the market
irregularities and offences. In order to advance the object of Parliament the
language used in sub- section (3) of sec tion 11C has to be given a wider
meaning. We are, therefore, of the considered opinion that section 11C (3)
gives the power to the investigating authority to call upon any person to
make a statement while furnishing any information, document or record.”
In the above view the imposition of penalty under section 15A(a) by the adjudicating
officer cannot be faulted.
- The appellant objects to the stand taken by the adjudicating officer with regard to
violation of the provisions of sections 13 and 18 read with section 2(i) of the SCRA.
According to the appellant, the finding s recorded by the adjudicating officer that the
impugned transactions are in the nature of sales/purchases def y the rules of evidence and
the facts on record. It is very strenuous ly argued that the adjudicating officer has acted
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without bringing on record any evidence or material to substantiate the stand taken by
him that the off market transfers are in the nature of sales/purchases. It is submitted that
the onus is on the adjudi cating officer to bring on record sufficient and convincing
evidence to establish his stand. The conclusion drawn in the impugned order that the
transactions in question have to be considered to be sales/purchases in the absence of
specific proof in support of the alleged loan transacti ons by the appellant is a serious
infirmity. It has been admitted before the investigating authority and the adjudicating
officer that the impugned transactions were in the nature of loan/repayment of loan and
relevant entr ies have been made in the delivery instruction slip. In other words , the
submissions made by the appellant absolve him of any further responsibility and the
adjudicating officer should have established the transactions to be in the nature of sales or
purchases. Off market transactions, according to the appellant, are legal in nature and the
impugned transactions fall within the exclusion carved out in section 18 of the SCRA.
With reference to section 2(i)(b) of the SCRA , it is argued that in the present case , there
is a transfer of securities by the depository from the account of one beneficial owner to
the account of another beneficial owner and this is not circumscribed by any time period
for payment of consideration and the transaction in question being covered in the form of
loan/repayment of loan no such payment i s envisaged. In short, the argument of the
appellant’s learned counsel is that the restrictions relating to actual delivery of securities
and payment of consideration within a specified period cannot be made applicable to the
impugned transactions and so there is no violation of sections 13 and 18 as concluded by
the adjudicating officer.
- The learned counsel for the Board supported the stand taken by the adjudicating
officer on the ground that the aim of SCRA is to prevent all kinds of undesirable
transactions and in the present case, appellant has taken a stand o f alleged loan
transactions to escape the clutches of the provisions of the SCRA without discharging the
primary onus of proving the claim of the said loan dealings. With reference to the
submissions made before the investigating officer , it is contended t hat the appellant had
sought time to locate and furnish documents in support of the loan transactions , but
eventually has failed to do so. According to the learned counsel for the Board, the
adjudicating officer cannot be faulted in the backdrop of the above admissions made by
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the appellant. According to her the provisions of sections 2(i)(a) and 2(i)(b) of the SCRA
have to be harmoniously construed. A reference is also made to the decision of this
Tribunal in the case of Mrs. B hanuben Jaisukhlal Shah vs . Securities and Exchange
Board of India, [Appeal no.271 of 2011 decided on March 5, 2010].
- We have considered the submissions of both the parties. For the sake of
convenience the impugned provisions of SCRA are extracted below:
Definitions. - In this Act, unless the context otherwise requires, –
…………..
(i) “spot delivery contract” means a contract which provides for,—
(a) actual delivery of securities and the payment of a price therefore
either on the same day as the date of the contract or on the next
day, the actual period taken for the despatch of the securities or the
remittance of money therefore through the post being excluded
from the computation of the period aforesaid if the parties to the
contract do not reside in the same town or locality;
(b) transfer of the securities by the depository from the account of a
beneficial owner to the account of another beneficial owner when
such securities are dealt with by a depository;
Contracts in notified areas illegal in certain circumstances.
- If the Central Government is satisfied, having regard to the nature or
the volume of transactions in securities in any State or area, that it is
necessary so to do, it may, by notification in the Official Gazette, declare
this section to apply to such State or area, and thereupon every contract in
such State or area which is entered into after the date of the notification
otherwise than between the members of a recognised stock exchange in
such State or area or through or with such member shall be illegal
……………………
Exclusion of spot delivery contracts from sections 13, 14, 15 and 17. - (1) Nothing contained in sections 13, 14, 15 and 17 shall apply to spot
delivery contracts.
(2) Notwithstanding anything contained in sub- section (1), if the Central
Government is of opinion that in the interest of the trade or in the public
interest it is expedient to regulate and control the business of dealing in
spot delivery contracts also in any State or area (whether section 13 has
been declared to apply to that State or area or not), it may, by notification
in the Official Gazette, declare that the provisions of section 17 shall also
apply to such State or area in respect of spot delivery contracts generally
or in respect of spot delivery contracts for the sale or purchase of such
securities as may be specified in the notification, and may also specify the
manner in which, and the extent to which, the provisions of that section
shall so apply.”
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As observed by the adjudicating officer off market transfers in the present case are
covered under section 2(i)(b) of the SCRA. There has been off market deals between the
appellant and other entit ies of the group by way of transfer of beneficial ownership
through the depository. The case of the appellant is that the restriction of time and
payment imposed on spot delivery cannot be imputed to a situation covered under section
2(i)(b) in as much as the provisions of section 2(i)(a) and 2(i)(b) are not connected by a
conjunction and so they stand alone as unconnected provisions. The charge levelled
against the appellant by the adjudicating officer is that the impugned off market transfer,
not having been substantiated as a loan transaction by the appellant, should be considered
to be a normal sale/purchase and the restrictions contained in section 2(i)(a) should be
harmoniously applied to the present situation as well. The issue under consideration has
got two limbs – (1) the real nature of the transaction and (2) the harmonious construction
of sections 2(i)(a) and 2(i)(b) of the SCRA. With regard to the first limb , the case of the
appellant is that the impugned transfer is in the nature of loan/loan r epayment.
Admittedly, it is for the appellant to advance evidence in support of his claim. The
adjudicating officer provided the appellant with sufficient opportunities to furnish
documentary proof in support of the claim. The appellant sought extension of time to
locate and furnish the relevant documents. There was no refusal of this prayer from the
investigating officer. The appellant did not furnish the required documentary evidence in
spite of getting a lon g interval between the summons issued by the investigating officer
and the show cause notice issued by the adjudicating officer. So the theory of loan
transaction could not be accepted by the adjudicating officer. He, then, proceeded to deal
with the transaction as one in the nature of sale/purchase which is reasonable and logical.
Thus, the facts on record show that the adjudicating officer has characterised the
transactions based upon the fact situation and the failure on the part of the appellant to
prove his claim. Once the transaction is regarded as sale/purchase, it has to be examined
whether the provisions of sections 2, 13 and 18 of the SCRA are complied with.
- The second limb of the argument, as aforementioned, deals with the harmonious
construction of the provisions of section 2(i)(a) and 2(i)(b) of the SCRA . We find that
this issue has been decided by this Tribunal in the case of Mrs. Bhanuben Jaisukhlal Shah
mentioned supra. The adjudicating officer has considered this issue in detail in the light
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of the decision of this Tribunal cited above. The observations of this Tribunal, though
relied on by the adjudicating officer, require reiteration to reinforce the stand taken by the
adjudicating officer. The relevant portions are extracted below for the sake of
convenience.
“According to clause (b), when securities are transferred from one beneficial
account to another, it would be treated as “actual delivery” of securities
within the meaning of clause (a). It is, thus, clear that clause (b) is not an
independent clause but only an explanation to the words “actual delivery” as
used in clause (a). We cannot, therefore, accept the argument of the
appellant that clause (b) is an independent clause and that the spot delivery
contract is complete with the me re transfer of securities from the account of
one beneficial owner to that of another without reference to the payment of
consideration. This could never be. If that were so, the contract itself would
become void being without consideration. Clause (b) cannot be picked up
and interpreted in a manner which defeats the very purpose for which it was
enacted. While interpreting the provisions of Section 2(i) of the Act, we
have to keep in mind the consequences which are likely to flow from the
intended interpretation. We cannot but hold that clause (b) in Section 2(i)
was not meant to stand on its own and it has to be read in conjunction with
clause (a).”
- The fact situation in the present case and the legal position as enunciated in the
decision of the Tribunal mentioned above make it clear that the transactions entered into
by the appellant are not in compliance with the requirements laid down for spot delivery
contracts under section 2(i) of the SCRA and from this it flows that they are in violation
of the provisions of sections 13 and 18 of the SCRA. - The learned counsel for the appellants attempted to put forward a very strong
argument that the adjudicating officer has failed to bring on record evidence and material
to substantiate the stand taken by him with reference to the off market transactions. Shri
Ankit Lohia, learned counsel for the appellants , very stoutly argued that there is no
evidence to substantiate the finding of the adjudicating officer that the transa ctions were
not in the nature of loan/loan repayment. Shri Vicky Singh learned counsel appearing for
Shri Bhavesh P. Pabari , contended that the wrong doing of the appellant must be
established on the basis of the evidence placed on record by the adjudicat ing officer and
the onus is squarely on the adjudicating officer to prove that there was the alleged
violation. A reference was made to section 106 of the Indian Evidence Act, 1872.
According to him, the defense advanced by the appellant is not material and it is not
relevant even if the appellant has failed to bring in evidence in support of the claim made
by him. It is submitted that the adjudicating officer should have brought on record
positive evidence to establish a ca se of sale/purchase transaction and the absence of
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explanation on the part of the appellant cannot be a ground for holding him guilty. The
adjudicating officer failed to establish his case of the transaction being one of the
sale/purchase and on this ground the charge against the appellant should be dropped.
- The learned counsel for the Board submitted that the appellant has failed to
discharge his primary onus even though the nature and details of transactions have been
communicated by the adjudicating officer and specific response was called for in respect
of the transactions. With reference to section 106 of the Indian Evidence Act, 1872, it is
pointed out that the facts especially in the knowledge of the appellant should be proved
by him. A plea of i nnocence cannot be advanced taking a legal ground that the
adjudicating officer has not brought on record positive evidence in spite of the non
response of the appellant to specific queries raised by the adjudicating officer. - We have considered the submission s of the parties . A t the outset , it has to be
mentioned that every case is built on the foundation of the facts relevant to that case. The
propositions of law have to be applied after taking into account the facts on record and
whether the facts f it in with the general legal principles. In the present case , we have
already dealt with the fact situation in detail. The investigating officer called for specific
details and documentary evidence in support of the alleged loan transactions of the
appellants. It is on record that the appellant sought time to furnish the required details
and this has not been refused by the adjudicating officer. So, in the present case, the
burden of proof still rests with the appellant. If the appellant had already di scharged his
onus by providing satisfactory explanation and requisite evidence , it can be said that the
onus shifts to the adjudicating officer. The provisions of section 106 of the Evidence Act
relied on by the a ppellants’ learned counsel deal with the burden of proof of a fact
especially within the knowledge of any person: “When any fact is especially within the
knowledge of any person the burden of proving that fact is upon him ”. A perusal of the
record shows that the documents relating to l oan transactions were within the knowledge
of the appellant and there was a commitment to produce the same after a specific period.
So, the facts of the case squarely fall within section 106 of the Evidence Act where the
burden is on the person who ha d knowledge of the fact. Admittedly, this has not been
discharged. We cannot appreciate the contention of the appellants’ learned counsel that
the adjudicating officer has to prove his case. We hasten to add that it would have been
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so if the appellant had discharged his primary onus. The appellants’ learned counsel
would like to import the requirements of evidence in criminal case to the present case
also and argue that the accused is not expected to prove his innocence. As is well known,
the degree of pro of and evidence in criminal case and civil case is different. The
appellants’ argument cannot be accepted in the facts of the present case especially when
the commitment made before the investigating officer has not been fulfilled by the
appellant. In the absence of the furnishing of the documents as committed, the
adjudicating officer was forced to draw his conclusion which is logical and reasonable in
the circumstances of the case. The appellants ’ learned counsel would argue that the
adjudicating officer himself is not sure about the real nature of the transactions and so he
has considered them to be in the nature of sale/purchase in a vague and inchoate fashion.
We cannot accept this contention again in view of the fact situat ion in the present case.
So we conclude that the adjudicating officer has taken a proper and reasonable stand on
the basis of the facts placed before him as regards the character of the transactions .
- The appellants’ learned counsel made a reference to the following case laws to
bring home the contention regarding specific evidence to be adduced by the Board. - George vs. State [1996CriLJ1755]
- S.L. Goswami vs. State of Madhya Pradesh [AIR1972SC716]
In the case of George vs. State, the appellants’ learned counsel highlighted the role of the
prosecution in proving its case in a clinching fashion beyond any shadow of doubt by
adducing necessary evidence. This case cannot be equated with the facts of the case
under appeal since the principle relates to a criminal case and the fact situation in the case
in hand is quite different. In the case of S.L. Goswami also, the appellants ’ learned
counsel would harp on the principles laid down therein that the onus of proving all the
ingredients of an offence is always upon the prosecution. Here also, the facts in the case
under appeal stand on a different footing and the principles of cri minal jurisprudence
cannot be wholly made applicable to civil proceedings. - The case laws relied on by the learned counsel for the Board, on the other hand,
support the stand taken by the adjudicating officer. In the case of Sucha Singh vs. State
of Punjab [2001(2)ACR1182(SC)] it has been held that section 106 of the Evidence Act
would apply to cases where prosecution has succeeded in providing facts for which a
14
reasonable inference can be drawn regarding the existence of such another fact unless the
accused by virtue of special knowledge regarding such facts fails to offer any explanation
which may lead to a different inference. The decision of the Supreme Court in State of
Andhra Pradesh vs. Bathu Prakasa Rao [1976 AIR 1845] also lays down the principle
that the burden of proving the exact character and circumstance of the acts committed by
a person is upon him.
- The appellants’ learned counsel then contended that the quantum of penalty is on
the higher side having regard to the facts of the case. According to him, the factors
enumerated in section 15J of the Act have not been given proper regard and penalty has
not been imposed in a uniform manner in re spect of all the entities of the group. A
reference is made to certain orders of the adjudicating officer in similar circumstances.
The appellants’ learned counsel made specific reference to orders of the adjudicating
officer in the case of Nirchem Associates [Adjudicating order no.BM/AO-60/2011] dated
April 26, 2011 and M/s. Uttar P radesh Trading Company Limited [Adjudicating order
no.PKK/AO/153/2011] dated August 29, 2011. - We have considered the arguments advanced by the learned counsel for the
appellants. It is settled law that quantum of penalty is related to the facts and
circumstances of each case. It depends on the consideration of the gravity of the
offence/violation by the adjudicating officer. Admittedly, penalty cannot be arbitrary,
excessive or unjust and should have due regard to the facts and circumstances of the case.
There cannot be uniformity among all the delinquents on the issue of imposition of
penalty since it depends on the gravity of mistakes and consideration of the same by the
adjudicating officer. The order s of the adjudicating officer referred to by the appellants’
learned counsel cannot lay down any standard parameter or uniform practice. In the
present set of cases , we are of the view that the penalty imposed is commensurate with
the gravity of the violation and the adjudicating officer has given due regard to the factors
enumerated under section 15J of the Act. So the quantum of penalty does not call for any
interference. - During the appeal proceedings certain ancillary issues were raised which requi re
to be mentioned in passing. One of the issues raised by the appellant s was that the entire
investigation report was not provided to them. We do not consider this to be a fatal flaw.
15
The contents of the investigation report have been paraphrased in the show cause notice
and the appellant has been given a clear picture of the factors leading to the wrong doing
alleged in the show cause notice. So there cannot be any prejudice to the appellant on
this ground. Another argument advanced by the learned counsel for the appellant is that
the show cause notice does not provide a clear picture of the alleged wrong doing and
there is no reference to the transaction in the nature of sale and purchase. We cannot
accept this ground also since the show cause notic e gives a clear and specific picture of
the wrong doing with reference to the provisions of law and we do not find any
vagueness or lack of clarity in the show cause notice. It is contended by the appellant
that off market transfers entered into by the appellant have not in any way affected the
securities market and there has been no attempt at manipulation and so there is no case
for any penalty. We have considered this issue in the background of the objects
contained in the provisions of SCRA. It is to be noted that SCRA is intended primarily to
prevent “undesirable transactions in the securities”. In the present case, the appellant was
found to have entered into certain transactions which were prima facie undesirable and
for which no proper explanati on was offered by him. No fault, therefore, can be found
with the findings arrived at by the adjudicating officer.
In view of the discussion above we uphold the order of the adjudicating officer
and dismiss the appeals. No costs.
S.S.N. Moorthy
Member
8.11.2012
Prepared and compared by
RHN
Sd/-
P.K. Malhotra
Member &
Presiding Officer (Offg.)
Sd/-