BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Appeal No. 142 of 2011

       Date of decision: 9.9.2011  

Mansukh Stock Brokers Ltd.
(formerly known as “Uttam Financial Services Ltd.)
Mansukh House, Plot No. 16,
Opp. Mother Dairy, Pandav Nagar,
New Delhi – 110092.

      … 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. Prakash Shah, Advocate for the Appellant.
Mr. Kumar Desai, Advocate with Mr. Mihi r Mody, Mr. Mobin Shaikh, Advocates for the
Respondent.

CORAM : Justice N. K. Sodhi, Presiding Officer
P. K. Malhotra, Member
S. S. N. Moorthy, Member
Per : Justice N. K. Sodhi, Presiding Officer (Oral)

Challenge in this appeal is to the order dated June 30, 2011 passed by the
adjudicating officer holding the appellant guilty of indulging in fraudulent and unfair trade
practices and imposing a monetary penalty of 5 lacs under Section 15HA of the Securities and Exchange Board of India Act, 19 92 (for short the Act) and another sum of 2 lacs for violating the code of conduct since the appellant is a registered stock broker.
The charge that has been established against the appellant is that it executed circular trades
in the scrip of M/s. KRBL Limited which is a listed company. The learned counsel
appearing for the respondent Board has placed before us the details of the trades executed
by the appellant alongwith othe r brokers which clearly indicate that the trades were
executed in circles. For instance, on August 20, 2003 the appellan t in its own account
sold 2000 shares of the aforesaid company to Adolf Pinto another stockbroker at 10:34:52
hrs. and Adolf Pinto then sells those shares to Bhagwandas Shah another stockbroker who
was trading in his proprietary account. This sale was made at 10:54:36 hrs. on the same
day and within two to three minutes Bhagwa ndas Shah sells the shares back to the

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appellant at 10:57:49 hrs. It is, thus, clear that the shares which started from the appellant
reached back to it in less than 30 minutes. It is the appellants own case that the scrip of
KRBL Ltd. is highly liquid. If th at is so, it is just not possi ble that the shares could go
back to the appellant in less th an half an hour. The manipulati on is writ large and it is by
now well settled that circular trades are not genuine trades as they do not transfer the
beneficial interest in the traded scrip and th at such trades only cr eate artificial volumes
which tend to lure the lay investors into trading. It is for this reason that such manipulative
trades are prohibited by the Securities and Exchange Board of India (Prohibition of
Fraudulent and Unfair Trade Pr actices relating of Securitie s Market) Regulations, 2003.
The aforesaid circle of trading is not a so litary instance and th ere are several other
instances as well where the appellant traded in circles with other brokers. We have
perused those circles as well which include larg er number of brokers. We are, therefore,
satisfied that the appellant alongwith others ha s been indulging in the circular trading and
the charge stands established.

2. What is urged by the learned counsel for the appellant is that in the case of Adolf
   Pinto who was a part of the circle, the ad judicating officer has imposed a penalty of 2 lacs only whereas in the case of the appellant the said amount is 7 lacs. This is so and
   we are of the view that the adjudicating offi cer was right because th e penalty imposed on
   the wrong doers including the appellant is pr oportionate to the percentage of trades
   executed by them. The volumes traded by the appellant are much larger than the volumes
   traded by Adolf Pinto. In the result, we find no merit in the appeal and the same stands dismissed.
   No costs.
   Sd/-
   Justice N. K. Sodhi
   Presiding Officer
   Sd/-
   P. K. Malhotra
   Member Sd/- S. S. N. Moorthy
   Member
   9.9.2011
   Prepared & Compared by
   ptm

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