Astitva Capital Market Private Limited vs Sebi

3. It is the contention of the learned counsel for the appellant

that the impugned order has been issued in haste, without

providing an opportunity of hearing and without considering the

available documents on record. It was contended that the Show

Cause Notice was issued on March 20, 2020 on the eve of

declaring the nationwide lockdown on account of the COVID-

19 Pandemic and when the appellant was not in a position to 3

obtain/retrieve the relevant documents from its office. Though,

the appellant has sought further time on account of the

lockdown related factors, the impugned order was passed by the

MCSGFC of NSE in a hurry. Moreover, in response to the

inspection observations provided by NSE the appellant provided

detailed responses to the queries raised by the NSE on

September 17, 2019 which is in the possession of the respondent

which was not considered while passing the impugned order.

One of the important documents therein is relating to the

accounts of Sri Yadvendra Sharma, on which a penalty of about

Rs. 1,11,00,000/- (Rupees One Crore Eleven Lakhs) has been

imposed only on the ground that the said Sharma did not have

sufficient balance in his margin account with the appellant and

therefore appellant had falsely reported the amount in the said

account. The learned counsel emphasized that this particular

client also had a deposit account with the appellant apart from a

trading account, the relevant details were forwarded to NSE. If

the deposit account of Sri Yadvendra Sharma was considered by

the MCSGFC it would have been clear that there was indeed a

surplus of more than Rs. 4.7 lakh after providing for the

required margin. However, since the MCSGFC did not use the

information which was available to the NSE and passed the

order in a hurry this fact was not considered and by imposing a 4

huge penalty of Rs. 1.1 Crore on this ground alone injustice has

been done to the appellant.

4. In response, while defending the impugned order, the

learned counsel for the respondent Sri Boatwalla contended that

the appellant did not provide the details relating to the two

accounts maintained by Sri Yadvendra Sharma in response to

the SCN. In any case, the trading account itself should contain

all the details of the client, including the availability of funds;

that is the requirement of the regulatory provisions.

5. Though we have been told and we also note from the

documents that there are a number of other charges against the

appellant and certain penalties have also been imposed for those

violations; without going into those details and proceeding from

the dispute emanating from sufficiency or otherwise of funds in

the account of Sri Yadvendra Sharma, we are of the considered

view that the matter needs to be re-examined by the MCSGFC.

Though, the appellant did not submit the relevant documents

relating to the account of Shri. Sharma, in response to the SCN

it is on record that certain details had been submitted by the

appellant to the NSE prior to the SCN. When the respondent did

not agree to the request of the appellant to provide extra time to 5

produce the documents particularly in the context of difficulties

relating to the Pandemic, it was incumbent on the respondent to

provide a reasonable opportunity or in the absence of which to

at least to consider all the documents available with the

respondent on the subject irrespective of whether it was

provided by the appellant in response to the show cause notice

or otherwise since the proceedings, including the SCN, in the

matter emanated from the inspection itself. If comingling

accounts, as in this case, is against regulatory provisions as

stated by the learned Counsel for NSE, that factor also needed

to be examined by the MCSGFC. A failure to do so, in our

opinion, has caused prejudice to the appellant particularly when

an extreme punishment of disabling the appellant from trading

in all segments of the market has been imposed on it apart from

a heavy penalty of more than Rs. 1.74 Crore.

6. In view of the above reasons, we quash the impugned

Order and remit the matter back to the MCSGFC of the NSE to

reconsider the matter de novo. The appellant shall give a

detailed reply to the show cause notice, with supporting

documents to NSE, on or before August 21, 2020. After

providing an opportunity of hearing, if sought by the appellant,

a fresh order may be passed by the MCSGFC of the NSE within 6

three months thereafter. In the interim, the trading terminals of

the appellant shall be enabled subject to the appellant depositing

an amount of Rs.75 lacs [Rupees Seventy Five lac only] with

the NSE and also subject to the condition that no fresh clients

shall be enrolled by the appellant. The amount so deposited

shall be kept in an interest-bearing account by the NSE.

7. The appeal as well as the Misc. Application No. 167 of

2020 seeking interim relief are disposed of on aforesaid terms

with no orders on costs.

8. The present matter was heard through video conference

due to Covid-19 pandemic. At this stage it is not possible to sign

a copy of this order nor a certified copy of this order could be

issued by the Registry. In these circumstances, this order will be

digitally signed by the Presiding Officer on behalf of the bench

and all concerned parties are directed to act on the digitally

signed copy of this order. Parties will act on production of a

digitally signed copy sent by fax and/or email.

Justice Tarun Agarwala Presiding Officer 7

TARUN Digitally signed by TARUN AGARWAL DN: c=IN, o=PUBLIC WORKS DEPARTMENT UTTAR PRADESH, postalCode=221505, st=Uttar Pradesh, 2.5.4.20=30fcf68685192bbc53e6ff1608a83fb3881de7 Dr. C.K.G. Nair ac2ab7954d509c85ed6e0f7c41,

AGARWAL serialNumber=095f8b286bb0b1cd07ff676611f4f5e79 99727d404aa38ca422f9d3529bdb8a3, cn=TARUN Member AGARWAL Date: 2020.08.03 16:20:50 +05'30'

Justice M. T. Joshi Judicial Member 03.08.2020 PK