Ishan Chadha vs Sebi

Date of Decision: 22.06.2016

Appeal No. 390 of 2015

Dhvani Darshan Kothari 203B, Harmony, Damodarwadi, A.C. Road, Ashok Nagar, Kandivali (East), Mumbai- 400 101 ...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

WITH Appeal No. 391 of 2015

Darshan J. Kothari 203B, Harmony, Damodarwadi, A.C. Road, Ashok Nagar, Kandivali (East), Mumbai- 400 101 ...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. S. K. Jain, Practicing Company Secretary for the Appellant in Appeal Nos. 390 & 391 of 2015.

Mr. Kumar Desai, Advocate with Mr. Anubhav Ghosh, Advocate i/b The Law Point in Appeal Nos. 390 & 391 of 2015 for the Respondent. 2

WITH Appeal No. 380 of 2015

Cholamandalam Securities Ltd. Dare House, No. 2, 1st Floor, N.S.C. Bose Road, Chennai- 600 001 ...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. Somasekhar Sundaresan, Advocate with Mr. Paras Parekh and Mr. Dhaval Kothari, Advocate i/b J. Sagar Associates for the Appellant.

Mr. Kumar Desai, Advocate with Mr. Tomu Francis and Ms. Bhavya Bhandari, Advocates for the Respondent.

WITH Appeal No. 381 of 2015

Dynamic Global Propfanchises Pvt. Ltd. J-9/18, Rajouri Garden, New Delhi- 110 027 ...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

WITH Appeal No. 382 of 2015

Man Mohan Singh Dua J-9/18, Rajouri Garden, New Delhi- 110 027 ...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 3

WITH Appeal No. 383 of 2015 Ajit Singh Dua J-9/18, Rajouri Garden, New Delhi- 110 027 ...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. Sachin Mittal, Advocate in Appeal Nos. 381, 382 and 383 of 2015 for the Appellant. Mr. Kumar Desai, Advocate with Mr. Tomu Francis and Ms. Bhavya Bhandari, Advocates in Appeal Nos. 381, 382 and 383 of 2015 for the Respondent. WITH Appeal No. 366 of 2015

Shatanand Sharma Sons HUF K- 202, Jasmine Block, Niho Scottish Garden, Mall Road, Indrapuram, Ghaziabad, Uttar Pradesh- 201 010 ...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. Rohit Choudhary, Advocate for the Appellant. Mr. Kumar Desai, Advocate with Mr. Anubhav Ghosh, Advocate i/b The Law Point for the Respondent.

WITH Appeal No. 367 of 2015 SMVD Financial Consultants 402, K.M. Trade Tower, Hotel Radisson Blu Complex, Kaushambi, Ghaziabad- 201 010 ...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 4

WITH Appeal No. 368 of 2015 SMVD Securities Private Limited 402, K.M. Trade Tower, Hotel Radisson Blu Complex, Kaushambi, Ghaziabad- 201 010 ...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

WITH Appeal No. 369 of 2015 SMVD Infrastructure Pvt. Ltd. 402, K.M. Trade Tower, Hotel Radisson Blu Complex, Kaushambi, Ghaziabad- 201 010 ...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. Rohit Choudhary, Advocate in Appeal Nos. 367, 368 & 369 of 2015 for the Appellant. Mr. Kumar Desai, Advocate with Mr. Tomu Francis and Ms. Bhavya Bhandari, Advocates Appeal Nos. 367, 368 & 369 of 2015 for the Respondent. WITH Appeal No. 388 of 2015 Jewel Garments Pvt. Ltd. Plot No. 29, DLF Industrial Area Phase II Faridabad 121 003 Haryana ...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 5

Mr. Vedant Singh, Advocate for the Appellant.

Mr. Kumar Desai, Advocate with Mr. Anubhav Ghosh, Advocate i/b The Law Point for the Respondent.

WITH Appeal No. 372 of 2015

Vijay Kapoor House No. A-61, Inder Puri, New Delhi- 110 012 ...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. Nikhilesh Ramachandran, Advocate for the Appellant. Mr. Kumar Desai, Advocate with Mr. Tomu Francis and Ms. Bhavya Bhandari, Advocates for the Respondent.

WITH Appeal No. 373 of 2015

Brijesh Sharma K- 202, Jasmine Block, Niho Scottish Garden, Mall Road, Indrapuram, Ghaziabad, Uttar Pradesh- 201 010 ...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. Nikhilesh Ramachandran, Advocate for the Appellant.

Mr. Kumar Desai, Advocate with Mr. Tomu Francis and Ms. Bhavya Bhandari, Advocates for the Respondent. 6

WITH Appeal No. 384 of 2015 Kamlesh Shantilal Jain 7A, Prince Apartments, 59, Ormes Road, Chennai 600 001 ...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

WITH Appeal No. 385 of 2015

Atul Tomar C-73 Vijay Ratan Vihar Sector-15, Part II Gurgaon- 122 001 ...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

WITH Appeal No. 386 of 2015

Mastermind Traxim Pvt. Ltd. 1221 Sector 21 D Faridabad- 120 013 Haryana ...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. Vedant Singh, Advocate in Appeal Nos. 384, 385 & 386 of 2015 for the Appellant.

Mr. Kumar Desai, Advocate with Mr. Anubhav Ghosh, Advocate i/b The Law Point in Appeal Nos. 384, 385 & 386 of 2015 for the Respondent. 7

WITH Appeal No. 387 of 2015

Sunvision Infotech Pvt. Ltd. First Floor 44 Gali No. 3, Kotla Mayur Vihar-1 Delhi ...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. Vedant Singh, Advocate for the Appellant.

Mr. Kumar Desai, Advocate with Mr. Anubhav Ghosh, Advocate i/b The Law Point for the Respondent.

WITH Appeal No. 363 of 2015

Ishan Chadha F-10, Rajouri Garden, New Delhi- 110 027 ...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

WITH Appeal No. 364 of 2015

Almondz Entertainment Pvt. Ltd. No. 2A, H-Block, Dilshad Garden, New Delhi- 110 095 ...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 8

WITH Appeal No. 365 of 2015 Nitin Chadha F-10, Rajouri Garden, New Delhi- 110 027 ...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. Sachin Mittal, Advocate for the Appellant in Appeal Nos. 363, 364 & 365 of 2015.

Mr. Kumar Desai, Advocate with Mr. Tomu Francis and Ms. Bhavya Bhandari, Advocates for the Respondent in Appeal Nos. 363, 364 & 365 of 2015. WITH Appeal No. 370 of 2015 Ajay Kumar HUF B-25, Lajpat Nagar II, New Delhi- 110 024 ...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. Nikhilesh Ramachandran, Advocate for the Appellant.

Mr. Kumar Desai, Advocate with Mr. Anubhav Ghosh, Advocate i/b The Law Point for the Respondent.

WITH Appeal No. 371 of 2015 Ajay Kumar Kapoor E-25, Lajpat Nagar-3, New Delhi- 110 024 ...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 9

Mr. Nikhilesh Ramachandran, Advocate for the Appellant. Mr. Kumar Desai, Advocate with Mr. Anubhav Ghosh, Advocate i/b The Law Point for the Respondent. WITH Appeal No. 389 of 2015 Shri Rajeev Gupta 287, 2nd Floor, Jagriti Enclave, Delhi- 110 092 ...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. Prakash Shah, Advocate for the Appellant.

Mr. Kumar Desai, Advocate with Mr. Anubhav Ghosh, Advocate i/b The Law Point for the Respondent.

WITH Appeal No. 412 of 2015

Shri Govardhan Lal B-27, Block-B, South Anarkali, Delhi- 110 092 ...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

WITH Appeal No. 413 of 2015

Mrs. Monika Gupta 287, 2nd Floor, Jagriti Enclave, Delhi- 110 092 ...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 10

AND Appeal No. 414 of 2015

Smt. Rama Rani B-27, Block-B, South Anarkali, Delhi- 110 092 ...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. Prakash Shah, Advocate in Appeal Nos. 412, 413 & 414 of 2015 for the Appellant.

Mr. Kumar Desai, Advocate with Mr. Anubhav Ghosh, Advocate i/b The Law Point in Appeal Nos. 412, 413 & 414 of 2015 for the Respondent.

CORAM: Justice J.P. Devadhar, Presiding Officer Jog Singh, Member Dr. C.K.G. Nair, Member

Per: Justice J.P. Devadhar (Oral)

1.

In these group of twenty six appeals, the appellants have

challenged the common order passed by the Adjudicating Officer ("AO"

for short) of Securities and Exchange Board of India ("SEBI" for short)

on 19.05.2015. By the said order penalty is imposed on each appellant

under Section 15HA of Securities and Exchange Board of India Act,

1992 ("SEBI Act" for short). In some cases penalty is also imposed under

Section 15A(a)/ 15HB of SEBI Act. Since common order is challenged in

these appeals, all these appeals are heard together and disposed of by this

common decision.

2. Dispute in all these appeals relate to the trades executed by the

appellants in the scrip of Richa Industries Ltd. ("RIL" for short) during 11

the period from 01.12.2008 to 31.12.2009 ("Investigation Period" for

short). During the investigation period, it was observed that the scrip of

RIL opened at ` 61.10 on 01.12.2008, touched high of ` 161.80 on

16.11.2009, low of ` 29/- on 16.03.2009 and closed at ` 110.20 on

31.12.2009.

3. In the impugned order, the AO has considered the entities referred

to therein as Group- I and Group- II entities and held that the entities

covered under each group were connected to each other by one way or

the other and had dealt in the scrip of RIL in a fraudulent and

manipulative manner, without real change in beneficial ownership of

shares by indulging in synchronized trades, structured trades, circular

trades and cross deals, thereby creating artificial volumes and price rise

in the scrip of RIL. It is also held that certain entities belonging to

Group-I had also contributed significantly to the positive Last Traded

Price (LTP), created New High Price (NHP) and entered into first trades

which further created positive LTP, thereby, manipulating the price of the

scrip of RIL. Accordingly, penalty is imposed on all the entities covered

under Group-I and Group-II. Penalty is also imposed on DBS

Cholamandalam Securities Limited (now known as Cholamandalam

Securities Ltd.) for aiding and abetting its clients covered under Group-I

and Group-II in executing manipulative and fraudulent trades i.e. circular

trades, synchronized trades, structured trades and self trades which

resulted in creation of artificial volume and price manipulation. 12

4. In para 16 of the impugned order, the AO has set out the

connection between the entities in each group. In para 17, the gross buy,

gross sell and net traded volume of the Group-I entities are set out. In

paras 20 to 76 of the impugned order the AO has set out the details of the

trades executed by the entities in Group-I and Group-II. In paras 77 to

161 of the impugned order the AO has recorded the submissions made by

the respective entities in Group-I and Group-II.

5. Without considering the merits of arguments advanced by each

entity in Group-I and Group-II, the AO, in paras 162 to 178 of the

impugned order after referring to the details of the trades executed by the

entities in the respective groups arrived at a conclusion that the said

entities had entered into circular trades where there was no transfer of

beneficial ownership and the shares were circulated among the group

entities which ultimately resulted in creation of artificial volume and

price rise in the scrip of RIL. It is further held that the said circular

trades were executed through certain reversal trades, synchronized trades

and structured trades.

Appeal No. 390 of 2015 (Dhvani D. Kothari v/s SEBI)

6. When Appeal No. 390 of 2015 was taken up for hearing, counsel

for the appellant submitted that on 30.06.2009 the appellant had

purchased 10000 shares of RIL in off market from Bahar Paper Pvt. Ltd.

and on 07.07.2009 sold 10000 shares of RIL on market wherein the

counter party happened to be Bahar Paper Pvt. Ltd. As the appellant had

made profits by acquiring 10000 shares of RIL in off market and selling 13

the said shares on market it is submitted that the appellant being

unconnected to Bahar Paper Pvt. Ltd., it could not be said that the trades

executed by the appellant were fraudulent trades.

7. In para 178 (iv) of the impugned order the AO has held that the

appellant alongwith others had indulged in various manipulative and

fraudulent trades in the scrip of RIL and by executing off and on market

transactions had created artificial volumes and thus violated the

provisions contained in the SEBI Act and the Securities and Exchange

Board of India (Prohibition of Fraudulent and Unfair Trade Practices

relating to Securities Market) Regulations, 2003 ("PFUTP Regulations"

for short) and hence liable for monetary penalty under Section 15HA of

SEBI Act. Accordingly, penalty of ` 5 lac is imposed on the appellant.

8. In the Table set out in para 16 of the impugned order, it is recorded

that the appellant-Dhvani Kothari is related to her husband Darshan

Kothari. Apart from the above, nowhere in the impugned order it is stated

that the appellant was connected with Bahar Paper Pvt. Ltd. or any of the

entities set out in the impugned order. Fact that the appellant purchased

shares of RIL from Bahar Paper Pvt. Ltd. in off market and sold the said

shares on market, wherein, Bahar Paper Pvt. Ltd. happens to be the

counter party, no doubt raises strong suspicion that the said trade may not

be a genuine trade. However, without recording any reasons as to how

the said trade could be said to be fraudulent and manipulative trade or the

basis on which the appellant could be said to be connected to Bahar

Paper Pvt. Ltd., merely on the basis of certain general observations the 14

AO could not have arrived at a conclusion that the trades executed by the

appellant were fraudulent and manipulative trades.

9. Apart from the above, from the impugned order it is not possible to

ascertain as to whether the AO has held that the trades executed by the

appellant were circular trades or synchronized trades or structured trades.

Assuming that the trades executed by the appellant were synchronized

trades or circular trades, the AO is not justified in treating the appellant

who has executed a single trade on market to be on par with other

persons who have been executed several circular trades, synchronized

trades, structured trades and self trades on market and impose uniform

penalty of ` 5 lac on all such persons including the appellant.

10. It is relevant to note that indulging in a fraudulent and unfair trade

practice relating to securities is a serious offence and therefore, under

Section 15HA of SEBI Act, maximum penalty of ` 25 crore is imposable

on any person indulging in such practices. In such a case, the AO without

considering the merits of individual case of the appellant could not and

ought not to have held that the trade executed by the appellant was a

fraudulent trade.

11. It is possible to envisage that in a given case, a person may

genuinely buy shares in off market and sell at a profit on market and by

co-incidence the counter party could be the person from whose the shares

were purchased. In such a case, without establishing the fraudulent

intention between the parties based on any direct or circumstantial

evidence, it cannot be said that the trades were not genuine trades. 15

12. Counsel for SEBI fairly stated that the impugned order does not

specifically record reasons for treating the trade executed by the appellant

as fraudulent trade. However, counsel for SEBI sought to justify the

impugned order by relying on a chart prepared by him from the data

contained in the show cause notice. According to the counsel for SEBI,

even though the impugned order does not record any reason for treating

the trade of the appellant to be a fraudulent trade, the said inference can

be easily drawn from the data contained in the show cause notice, copy of

which has already been furnished to the appellant.

13. It is well established in law, that where a decision affects the rights

of any person then it is absolutely essential that reasons must be recorded

for arriving at such decision [see Kranti Associates (P) Ltd. v/s Masood

Ahmed Khan reported in (2010) 9 SCC 496]. In the present case,

appellant is held guilty of indulging in fraudulent transactions in

securities which entails penalty up to ` 25 crore under Section 15HA of

SEBI Act. In the absence of any reason recorded in the impugned order,

it is not open to SEBI to contend that the inference must be drawn from

the show cause notice. In these circumstances, we have no option but to

set aside the impugned order qua the appellant and restore the matter for

fresh decision on merits.

14. Fact that the appellant had not filed any reply to the show cause

notice and the fact that the appellant had failed to avail the opportunity of

personal hearing, did not preclude the AO from considering the data

given in the show cause notice and record reasons for arriving at any 16

conclusion on the basis of the said data. In the absence of any such

reasons recorded in the impugned order, it is not open to the counsel for

SEBI to supply reasons on the basis of a chart prepared by him. Apart

from the above, treating the appellant who has executed a single trade on

market could not be treated on par with others who had executed multiple

trades and impose uniform penalty, especially when the AO by

exercising discretion has deemed it fit not to impose maximum penalty

prescribed under Section 15HA of SEBI Act. In other words, the AO is

not justified in treating the persons who are not similarly situated as one

class and impose uniform penalty.

15. For all the aforesaid reasons, the impugned order is quashed and

set aside qua the appellant and is restored to the file of AO for passing

fresh order on merits and in accordance with law.

Appeal No. 391 of 2015

16. Appellant herein is the husband of Dhvani D. Kothari (Appellant

in Appeal No. 390 of 2015). Appellant in off market had acquired

50,000 shares of RIL from Bahar Paper Pvt. Ltd. between 16.06.2009 to

30.06.2009 and sold on market 40,000 shares of RIL during the period

from 18.06.2009 to 02.07.2009.

17. In the impugned order, the AO has held that the appellant has

indulged in several manipulative and fraudulent trades in the scrip of RIL

and by executing off and on market transactions has created artificial

volumes, thereby violating the provisions contained in the SEBI Act and 17

PFUTP Regulations and hence appellant is liable for monetary penalty

under Section 15HA of SEBI Act. Apart from recording that the

appellant is related to his wife Dhvani D. Kothari, there is no finding

recorded in the impugned order to suggest that the appellant was

connected either to Bahar Paper Pvt. Ltd. or any other entities in Group-

I/Group-II. In the absence of any finding recorded in the impugned order

it is impossible to ascertain as to whether the AO has held that the trades

executed by the appellant were circular trades or synchronized trades or

structured trades. Reasons not recorded in the impugned order could not

be supplied by counsel for SEBI by furnishing a chart. Apart from the

above, the appellant could not be treated on par with other persons who

had executed circular/synchronized/structured trades and impose uniform

penalty of ` 5 lac, on the appellant and others who had executed

circular/synchronized/structured trades.

18. In these circumstances, for the reasons stated in case of Dhvani D.

Kothari (Appeal No. 390 of 2015) we set aside the impugned order qua

the appellant and restore the matter to the file of AO for fresh decision on

merits and in accordance with law.

Appeal Nos. 380, 381, 382 & 383 of 2015

19. Dispute in these four cases relate to the trades in the scrip of RIL

executed during the investigation period by the broker, Cholamandalam

Securities Ltd. (Appellant in Appeal No. 380 of 2015) on behalf of its

clients Dynamic Global Profanchises Pvt. Ltd. (Appellant in Appeal No.

381 of 2015), Man Mohan Singh Dua (Appellant in Appeal No. 382 of 18

2015) and Ajit Singh Dua (Appellant in Appeal No. 383 of 2015)

("Clients" for convenience).

20. In para 87 and para 92 of the impugned order the AO has recorded

the submissions made by the clients (Dynamic Global Profanchises Pvt.

Ltd., Man Mohan Singh Dua and Ajit Singh Dua) that the transactions on

market/ off market in the scrip of RIL were carried out in their account

by the broker (Appellant in Appeal No. 380 of 2015) without their

instructions/ consent. In para 126 of the impugned order, AO has

recorded the submission made by the broker (Appellant in Appeal No.

380 of 2015) that the alleged trades were executed by it pursuant to

instructions given by the aforesaid clients.

21. After recording the aforesaid submissions made by the broker and

its clients which are diametrically opposite to each other, the AO, without

recording any finding as to whose submission is worthy of acceptance,

has purported to hold that the clients (Dynamic Global Profanchises Pvt.

Ltd., Man Mohan Singh Dua and Ajit Singh Dua) are guilty of trading in

the shares of RIL in a fraudulent and manipulative manner and the broker

(Cholamandalam) is guilty of aiding and abetting the clients in executing

fraudulent trades. If the clients had not instructed the Broker to trade in

the shares of RIL, then the clients could not be held guilty. Assuming that

the clients had instructed the broker to trade in the shares of RIL, how the

broker can be said to have aided abetted in executing fraudulent trades is

not set out in the impugned order. In our opinion, the AO was duty

bound to consider the respective submissions made by the broker and the 19

clients and record his reasons for accepting or rejecting any of the said

submissions. Failure on part of the AO to consider the submissions made

by the broker and the clients has led to miscarriage of justice.

22. Apart from the above, in para 176 of the impugned order, the AO

has recorded the submission of the broker that the cross deals executed

by it on behalf of its clients are nothing but negotiated deals and

thereafter, by relying on a decision of this Tribunal in case of Bubna

Stock Broking Services Ltd. v/s SEBI (Appeal No. 41 of 2009 decided on

04.11.2009) the AO proceeded to hold that the trades in question are

nothing but cross deals and cannot be treated as negotiated deals.

23. As per SEBI circular dated 14.09.1999, all negotiated deals

(including cross deals) are permitted to be executed only on the screens

of the exchanges in the price and order matching mechanism of the

exchanges just like any other normal trade. Thus, executing negotiated

deals including cross deals is permitted on the screens of the exchanges.

As held by this Tribunal in case of Bubna Stock Broking Services Ltd.

(supra) it is only if the broker had attempted to interfere with the price

and the order matching mechanism of the system, action can be taken

against the broker. In the present case, there is no such finding recorded. Since the impugned order does not contain any finding as in the case of

Bubna Stock Broking Services Ltd. (supra) that the broker has attempted

to interfere with the price and the order matching mechanism of the

system, the AO is not justified in rejecting the plea of the broker by

merely relying on the decision of this Tribunal in case of Bubna Stock 20

Broking Services Ltd. (supra). Counsel for SEBI cannot be permitted to

supply reasons which are not to be found in the impugned order.

24. In these circumstances, we set aside the impugned order qua the

appellants in these four appeals and restore the matters to the file of AO

for fresh decision on merits and in accordance with law.

25. At this stage, counsel for both parties in the remaining cases

submitted that in view of our decision in aforesaid appeals, the impugned

order in all other appeals may also be quashed and restored for fresh

decision on merits and in accordance with law.

26. Accordingly, the impugned order is quashed against all other

appellants and restored for fresh decision on merits and in accordance

with law.

27. All twenty six appeals are disposed of in the aforesaid terms with

no order as to costs.

Sd/-

Justice J.P. Devadhar Presiding Officer

Sd/-

Jog Singh Member

Sd/-

Dr. C.K.G. Nair Member 22.06.2016 Prepared & Compared By: PK