Ganpati Multi Commodity Business India ... vs Sebi

BEFORE THE SECURITIES APPELLATE TRIBUNAL MUMBAI Date of Decision : 20.09.2022 Appeal No. 566 of 2022 Ganpati Multi Commodity Business India Pvt. Ltd. Office at: 37, K Block, Sriganganagar - 335 001, Rajasthan. .....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. Sanjeev Kumar Choudhary, Advocate for the Appellant. Mr. Sumit Rai, Advocate with Mr. Nishit Dhruva, Mr. Ravishekhar Pandey and Ms. Shefali Shankar, Advocates i/b MDP & Partners for the Respondent. CORAM : Justice Tarun Agarwala, Presiding Officer Ms. Meera Swarup, Technical Member Per : Justice Tarun Agarwala, Presiding Officer (Oral) 1. The appellant has filed the present appeal challenging the order dated May 31, 2022 passed by the Adjudicating Officer ('AO' for short) of the Securities and Exchange Board of India ('SEBI' for short) imposing a penalty of Rs. 15 lakh under Section 23D of the Securities Contracts (Regulation) 2 Act, 1956 ('SCRA' for short) and Rs. 5 lakh under Section 15 HB of the Securities and Exchange Board of India Act, 1992 ('SEBI Act' for short).

2. The facts leading to the filing of the present appeal is, that the appellant is a broker and an inspection was conducted with regard to Commodity Derivative Broking activities of the appellant from the period April 01, 2019 to September 30, 2020. Based on the observation made in the inspection report and, after examining reply submitted by the respondent, a show cause notice was issued. The broad allegation is- (a) misuse of clients' funds, (b) non-segregation of clients' funds, (c) non-segregation of clients' securities, (d) non-settlement of client's funds and (e) incorrect submission of data to Exchange. The aforesaid violations were under Section 23D of the SCRA read with circular dated November 18, 1993 and September 26, 2016. 3. After considering the reply, the respondent came to the conclusion that the reply was not satisfactory and that there was enough documentary evidence to show that the appellant had misused the clients' funds, did not segregate the clients' funds from its own funds and misused the clients' securities 3 for its own purposes. Further, incorrect submission of data was given to the Exchange.

4. Before us not a single shred of evidence has been placed to show that the facts and figures indicated in the impugned order was incorrect. Nothing has been indicated as to why the findings of the AO with regard to misuse of clients' funds, non-segregation of clients' funds, non-segregation of clients securities etc. were incorrect and contrary to the record. 5. The only ground urged is, that during the period in question the appellant had taken open position in castor seed contracts and since the contracts reached the lower circuit due to imposition of additional margin on September 25, 2019 the market crashed and remained stuck at the lower circuit on account of which the appellant committed multiple defaults and could to pay the margin and other liabilities. It was urged that the appellant had informed the Stock Exchange and since the appellant could not square off the open buy position of defaulting clients, the assets of the appellant was seized and utilized partially for payment of the defaulted amount. 6. We are of the view that the open position contract taken by the appellant and the resultant market crash leading to the 4 default committed by the appellant has nothing to do with the violation discovered pursuant to the inspection.

The appellant is unnecessarily trying to confuse the two issues which are distinct and separate. 7. In the light of the aforesaid, since neither cogent reason nor evidence has been given to show that the order impugned is incorrect, we are satisfied that the order of AO does not require any interference. The appeal fails and is dismissed summarily at the admission stage. 8. This order will be digitally signed by the Private Secretary on behalf of the bench and all concerned parties are directed to act on the digitally signed copy of this order. Certified copy of this order is also available from the Registry on payment of usual charges. Justice Tarun Agarwala Presiding Officer Ms. Meera Swarup Technical Member RAJALA Digitally signed by RAJALAKSHMI KSHMI H NAIR 20.09.2022 H NAIR Date: 2022.09.26 11:33:15 +05'30' msb