BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Appeal No. 143 of 2011
Date of Decision : 28.11.2011
Ms. Aditi Dalal
Ground Floor,
Bhupen Chambers,
Dalal Street,
Mumbai 400 001.
…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. P.N. Modi, Advocate with Mr. Ajai Achuthan, Advocate for the Appellant.
Dr. (Mrs.) Poornima Adva ni, Advocate with Mr. Ajay Khaire, Advocate 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)
This order will dispose of thr ee Appeals no. 143, 147 and 148 of 2011 in
which similar questions of law and fact arise.
- One of the reasons why the impugned orde r in this set of three appeals needs
to be modified and the appellants given onl y a warning is because of the inordinate
delay in issuing directions under sections 11 and 11B of the Securities and Exchange
Board of India Act, 1992. The alleged manipulation of six scrips in question is said to
have taken place in the year 1999-2000 and proceedings against the appellants were
initiated only in the year 2005 in respect of one of the scrips and a common impugned
order came to be passed only in August, 2011 debarring the appellants from accessing
the capital market for a period of two years. Apart from the inordinate delay, we are
otherwise satisfied that the merits of the case also require that the appellants to be
only warned in the circumstances of the present case. 2 - The Securities and Exchange Board of I ndia (for short the Board) carried out
investigations and found that the scrips of as many as six companies namely,
Ravalgon Sugar Farms Limited (Ravalgon), Shrenuj & Co. Limited (Shrenuj), Roofit
Industries Limited (Roofit), Prudential Phar maceuticals Limited (Prudential), VXL
Instruments Limited (VXL) and Jagsonpal Pharmaceuticals Limited (Jagsonpal) had
been manipulated by several entities including the appellants herein during the period
from 1999-2001. The Board also found that th e three appellants before us were
connected entities and that they along with others had manipulated the scrips. The
Board further found that the modus operandi adopted by each of the delinquents
including the appellants herein was the same. Separate but similar show cause notices
came to be issued to different entities alleging violation of the Securities and
Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices
Relating to Securities Mark et) Regulations, 1995. Separa te enquiries were held
against each of the delinquents for each of the scrips and this is where the problem
arose. In the matter of Ravalgon and Sh renuj, the whole time member by his two
separate orders both dated August 31, 2004 debarred the appellants from accessing
the capital market for a period of six months and the period was to run concurrently.
The period of debarment is long over. When dealing with the scrip of Roofit, another
whole time member by his order dated N ovember 29, 2006 debarred the appellants
for a period of six months from the date of the order. In Appeal no. 148 of 2006 this
Tribunal reduced the period to two months after hearing the couns el for the parties
who then agreed that it was not necessary fo r us to record reasons. Then in the scrip
of Prudential, Shri Prashant Saran, the whole time member by his order dated
November 11, 2010 warned the appellants to be careful in future and exercise due
care and diligence in the conduct of their affairs in the securities market. While giving
them a warning, the whole time member had taken note of the previous orders by
which the appellants for similar manipulations in other scrips during the same period
had been kept out of the market. He also took note of our order in Appeal no. 148 of
2006 by which we had reduced the period of debarment from six months to two
months. While giving a warning to the appellants the whole time member observed in
his order dated November 11, 2010 as under :- 3
“I observe that the abovementi oned violations pertain to time
periods similar to the investigation period therein. I believe that the
imposition of further debarment for the said violations in the same
period is not necessary in this ma tter. Considering the totality of
the case, in the interest of jus tice and enquiry, I dispose of the
present proceedings, as ordered below.
Therefore, taking into account th e facts and circumstances of the
case and in exercise of the powers vested in me by Section 19 of
the SEBI Act, 1992 read with Section 11B and 11(4) of the SEBI
Act, 1992 hereby warn Ms Aditi A Dalal to be cautious in her
future dealings and exercise due care and diligence in the conduct
of her affairs as a securities market participant. Further, any future
instance of violation or non-comp liance by her with the SEBI Act
and Rules and Regulations framed there under shall be dealt with
stringently.”
Enquiries in regard to the scrip of VXL were conducted by a different whole time
member (Dr. K.M. Abraham) and he by his order dated January 17, 2011 debarred the
appellants from accessing the capital market for a period of two months from the date
of the order. In the scrip of Ravalgon and Shrenuj, Shri Prashant Saran by his order
dated February 24, 2011 again warned the appellants to be careful and cautious in
future expressly observing that they had al ready been penalised by the Board for the
same set of trades by separate orders dated August 31, 2004 though in a different
capacity. He was of the view that impositi on of further penalty was not necessary.
Enquiries were also conducted by Shri Pras hant Saran in the scrip of Jagsonpal and
by his order dated August 2, 2011 he has debarred the appellants from accessing the
capital market for a period of two years fr om the date of the order without noticing
his earlier orders by which he had warned the appellants on the ground that they had
earlier been debarred. This order has been impugned in these appeals. As already
observed, the period during which the manipulat ion is said to have taken place is the
same, the modus operandi adopted by the appella nts in this scrip as well as in the
scrip of Ravalgon and Shrenuj was also the same, we see no reason why he should
have debarred the appellants for two years when they have already been warned
earlier on the ground that they have undergone debarment by earlier orders referred to
above. If all the enquiries had been c onducted simultaneously, the appellants would
not have found themselves in a situation in which they are today. Just as in case of
orders dated August 31, 2004, the period of debarment was allowed to run
4
concurrently, any period for which the appellants would have been debarred for other
scrips would have also run concurrently then. The problem has arisen because
different whole time members at differe nt points of time conducted enquiries
pertaining to the same investigation period where the modus operandi adopted by the
delinquents for the alleged manipulation of the scrips was the same. Having debarred
the appellants by the earlier orders, the sa me whole time member by his subsequent
orders dated November 11, 2010 and Februa ry 24, 2011 gave them warning. It is
obvious that he was not consistent in his approach. He did not take notice of his
previous orders in the order now impugne d before us. Even assuming that the
appellants were guilty of alleged manipulation, all that was required was another
warning to the appellants as was done pr eviously. Consequently, we do not think it
necessary to go into the merits of the charge pertaining to manipulation. In this view
of the matter, we are of the view that the ends of justice would be adequately met if
the appellants before us are given a warni ng to be careful and cautious in future. The
impugned order stands modified accordingly.
These appeals stand disposed of as above. No costs.
Sd/-
Justice N.K. Sodhi
Presiding Officer
Sd/-
P.K. Malhotra
Member
Sd/-
S.S.N. Moorthy
Member 28.11.2011
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