BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Appeal No. 153 of 2012
Date of decision: 11.09.2012 M/s. DSE Financial Services Ltd.
A subsidiary of Delhi Stock Exchange Limited
DSE House, 3/1, Asaf Ali Road,
New Delhi – 110 002.
…Appellant
Versus
Securities and Exchange Board of India
SEBI Bhavan, Plot No. C-1A, G-Block,
Bandra Kurla Complex,
Mumbai – 400 051.
… Respondent
Mr. Shambhu Nath Singh, Advocate for the Appellant.
Mr. Prateek Seksaria, Advocate with Mr. Mobin Shaikh, Advocate for the Respondent.
CORAM : P. K. Malhotra, Member & Presiding Officer ( Offg .)
S. S. N. Moorthy, Member
Per : P. K. Malhotra (Oral)
The appellant before us is a subsidiary of Delhi Stock Exchange Limited and
registered with the Securities and Exchange Board of India (the Board) as a stock
broker of the National Stock Exchange of India Limited, Bombay Stock Exchange
Limited and also as a depository participant of Central Depository Services (India)
Limited.
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- The Board carried out inspection of the appellant during February 8-23, 2007
with regard to its activities as a stock broker and also as a depository participant. During
inspection, the Board noticed certain deficiencies with regard to manipulation of records
and in the functioning of the appellant and observed that it has violated certain
provisions of the Securities and Exchange Board of India Act, 1992, the Securities
Contracts (Regulation) Act, 1956, The Depositories Act, 1996 and the rules and
regulations framed thereunder with regard to maintenan ce of its records. After
affording an opportunity of hearing, the adju dicating officer of the Board, by its order
dated April 10, 2012, imposed a penalty of ` 4 lacs on the appellant under sections 15F
& 15HB of the Act and section 19G of the Depositories Act, 1996. Hence this appeal. - We have heard learned counsel for the parties for some time who have taken us
through the record. We have specifically looked into the observations made by the
adjudicating officer in para 206 of his order which reads as under: “In respect of the said submissions of the Noticee, I have noted that
the inspections have not revealed any unlawful gains made by the
Noticee by indulging into such violations/non-compliances. It is also
not possible from the information/details available with me to arrive at
the figures for the unlawful gains made by the Noticee or the loss
suffered by the investors. Further, the available details do not suggest
that the Noticee had indulged repetitively in such violations/non-
compliances. I have noted that the violations committed by the
Noticee are mostly technical in na ture. While some of those are
solitary instances, for others the Noticee has mostly taken/initiated
corrective measures.”
Under similar circumstances in one of th e cases decided by us earlier (Religare
Securities Limited vs. SEBI Appeal no. 23 of 2011 decided on 16.6.2011), we have
observed that it must be remembered that the purpose of carrying out inspection is not
punitive and the object is to make the intermediary comply with the procedural
requirements in regard to the maintenance of records. We have also observed that every
minor discrepancy/irregularity found during the course of inspection is not culpable and
the object of the inspection could well be achieved by pointing out the
irregularities/deficiencies to the intermediary at the time of inspection and making it
compliant. As per the observations made by the adjudicating officer himself, the
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violations committed by the appellant are mostly technical in nature; some of them are
solitary instances and for othe rs the appellant has mostly taken/initiated corrective
measures. In view of this, we are of th e view that the adjudicating officer was not
justified in taking punitive action.
We, therefore, set aside the impugned or der and allow the appeal with no order
as to costs
Sd/-
P. K. Malhotra
Member &
Presiding Officer ( Offg.)
Sd/-
S.S.N. Moorthy
Member 11/9/2012
Prepared & compared by-ddg