BEFORE THE SECURITIES APPELLATE TRIBUNAL MUMBAI
Appeal No. 3 of 2008
Date of decision : 4.9.2008
Sanjay Soni …… Appellant
Versus
Whole Time Member, Securities and Exchange Board of India …… Respondent
Mr. J.J. Bhatt Advocate for the Appellant.
Dr. Poornima Advani Advocate with Mr. Amit Survase Advocate for the Respondent
Coram : Justice N.K. Sodhi, Presiding Officer
Arun Bhargava, Member
Per : Justice N.K. Sodhi, Presiding Officer (Oral)
This appeal is directed against the order dated 11.12.2007 passed by the whole time member of the Securities and Exchange Board of India (hereinafter called the Board) issuing directions, among others, to the appellant under 11B of the Securities and Exchange Board of India Act, 1992 (for s hort the Act) restraining him from buying, selling or dealing in securi ties for a period of six mo nths. The appellant is an investor/trader.
The Board found that during the period from September 27, 2004 to November 2, 2004 there was a spurt in price of the scrip of Vijay Textiles Ltd. (for short the company). It ordered investigations which revealed that a group of traders/investors alongwith a few brokers had executed reversal/circular trades in the scrip of the company during the period of investigation as a result whereof ar tificial volumes had been created leading to increase in price from Rs.62 to Rs.166 durin g the relevant period. The investigations further revealed that the appellant alongwith his wife Krupaben Soni and others formed a group and traded among themselves through thei r respective brokers executing reversal
and circular trades. Each of the entities was issued a separate notice calling upon them
to show cause why appropriate directions be not issued to them under section 11B of the
Act. The details of the connections between the appellant and other members of the group
were furnished alongwith the show cause notic e. Details of the synchronized/ circular/
reversal trades were also furnished alongw ith the show cause notice. The appellant
claims that he filed a reply to the show cause notice which fact is seriously disputed by
the learned counsel appearing for the res pondent Board. The impugned order also takes
notice of the fact that the appellant did not file any reply. The appellant has not been able
to satisfy us whether he actually filed a repl y as contended by him. We are, therefore,
proceeding on the basis that the appellant did not file any rely. After holding a detailed
inquiry and on a consideration of the mate rial collected during the course of the
investigations, the Board found that the charge of violating Regulation 4 of the Securities
and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices
relating to Securities Mark et) Regulations, 2003 (for s hort the regulations) stood
established. Accordingly, by the impugned order the appellant alongwith other members
of the group have been restrained from accessi ng the capital market for a period of six
months. Hence this appeal.
We have heard the learned counsel for the parties. The findings recorded in the impugned order have not been seriously challeng ed before us. It is, however, contended by Shri. J.J. Bhatt learned counsel that the appellant and his wife were lured by Haresh Soni a cousin brother of the appellant to join the group and it was he who executed all the trades on their behalf. He further conten ds that the appellant executed very small number of trades which have been found to be circular in nature. It is also urged on behalf of the appellant that he and his wife did not know that they were executing circular trades and that the quantum of punishment imposed on them is unduly harsh. We are unable to agree with the learned counsel for the appellant. The appellant has not even produced a copy of the show cause notice whic h we have now obtained from the learned counsel for the respondent. It has been al leged that the appellant along with others formed a group and executed circular and s ynchronized trades. The details of the connections between the members of the group ha ve also been furnished. The details of the circular and synchronized trades have also been given to the appellant in the form of charts. Charts are print outs from the comput er where all the trades were recorded. The fact that the appellant formed a part of the group and that he alongwith his wife executed the trades shown in the charts has not been disputed. In view of this documentary material against the appellant no fault can be found with the findings recorded by the whole time member. Since all the member s of the group executed trades among themselves and their trades constitute 67.11% of the total traded quantity in 17 days, each one of them has been debarred from buying, selling or dealing in securities for six months. The penalty imposed is reasonab le and cannot be said to be harsh or disproportionate to the gravity of the charge established. In this view of the matter, we find no merit in the appeal and the same stands dismissed with no order as to costs.
Sd/-
Justice N.K. Sodhi
Presiding Officer
Sd/-
Arun Bhargava
Member
4.9.2008 bk/-