Ksbl Securities Ltd. vs Sebi

Date of Decision : 18.10.2019

Appeal No. 432 of 2019

KSBL Securities Ltd. G-55, Third Floor, Royal Palace, Vikas Marg, Delhi- 110 092 ...Appellant

Versus

National Stock Exchange of India Limited Exchange Plaza, Bandra-Kurla Complex, Bandra East Mumbai - 400 051 ...Respondent

Ms. Rinku Valanju, Advocate with Mr. Akshit Jain, Advocate i/b Mr. Amit Gupta, Advocate for the Appellant.

Mr. Rashid Boatwalla, Advocate with Ms. Shreya Anuwal, Advocate i/b Manilal Kher Ambalal & Co. for the Respondent.

CORAM: Justice Tarun Agarwala, Presiding Officer Dr. C.K.G. Nair, Member Justice M. T. Joshi, Judicial Member

Per: Justice Tarun Agarwala (Oral)

1.

The appellant is a registered Portfolio Manager registered

with Securities and Exchange Board of India (Portfolio

Managers) Regulations, 1993. The appellant is also a broker.

The appellant entered into a Portfolio Managing Service 2

Agreement with Sunil Gupta. It transpires that Sunil Gupta sent

an Email dated March 11, 2019 to the appellant indicating the

appellant that he would stop trading with the appellant from

June 30, 2019 onwards. This Email was duly acknowledged by

the appellant. On June 28 2019, Sunil Gupta intimated the

appellant to stop all the trading activities and transfer the

balance amount of ` 1,00,00,706.29/- from the ledger account to

his bank account by June 30, 2019. Pursuant to the said Email,

the appellant accordingly cleared his liability and issued a

cheque amounting to ` 1,00,00,706.29/- on June 30, 2019 in

favour of Sunil Gupta. The record suggest that the appellant

made a request to Sunil Gupta praying that he should not encash

the cheque as the appellant was short of funds. It transpires that

the Sunil Gupta did not encash the cheque on the request of the

appellant and ultimately presented the cheque for encashment

on August 07, 2019 which bounced on August 08, 2019. Sunil

Gupta accordingly made a complaint before the Investor

Services Cell of the National Stock Exchange of India Limited

("NSE" for convenience) on August 26, 2019 where the

appellant admittedly was a trading member.

2. The record also indicates that objections were raised by

the appellant to the extent that the appellant have raised a 3

dispute before the Arbitrator and that the transactions in

question was in the nature of loan financing which is out of the

framework of the Exchange and, therefore, the complaint cannot

be considered by the Investor Grievance Cell.

3. Investor Grievance Cell issued an order dated September

13, 2019 rejecting contention raised by the appellant and

allowed the claim of Sunil Gupta directing the appellant to pay a

sum of ` 1,00,00,706.29/- to Sunil Gupta. The Investor

Grievance Cell held that the Memorandum of Understanding

between the appellant and Sunil Gupta indicate that the

appellant was conducting its trading operations and had issued a

cheque towards its liability while closing the ledger account of

Sunil Gupta.

4. By a communication dated October 01, 2019 NSE

informed the appellant that the appellant is required to deposit

the amount admissible to the investor and, on account of

insufficient funds in the appellants' exchange due account, the

payment cannot be made to the investor. The exchange

accordingly directed the appellant to make the necessary funds

available to the exchange dues account failing which they could

withdraw the trading facilities of the appellant. The appellant 4

being aggrieved by the order dated October 01, 2019 passed by

the NSE has filed the present appeal.

5. The contention of the appellant is, that he is a registered

under SEBI (Portfolio Managers), Regulations, 1993 and there

is a dispute with regard to payment to Portfolio Managing fee

with his client Sunil Gupta for which a dispute has already been

raised before the Arbitrator which is pending. It was thus

contended that under the NSE guidelines complaints in respect

of transactions which are already subject matter of Arbitration

proceedings cannot be entertained by the Investor Services Cell

of the Exchange.

6. Having heard the learned counsel for the appellant, we

find that no details have been provided as to what exactly is the

dispute raised by the appellant which is alleged to be pending

before the Arbitrator. From a reading of paragraph 5.3.6 of the

Memorandum of Appeal, we find that the dispute between the

appellant and Sunil Gupta relates to non-payment of Portfolio

Management Services (PMS) fee by Sunil Gupta to appellant.

The decision by the Investor Grievance Cell relating to refund

` 1,00,00,706.29/- is towards the bouncing of cheque which has

nothing to do with the alleged dispute raised by the appellant 5

with regard to the PMS fee. The contention raised that the

Investor Grievance Cell of the Stock Exchange had no

jurisdiction to decide the complaint of Sunil Gupta is

misconceived. The contention that such dispute cannot be

raised since the matter was already pending before the

Arbitrator is also erroneous in as much as the dispute before the

Arbitrator is not the same dispute. We are further of the opinion

that the appellant is not entitled for any discretion any relief

from this Tribunal. The bouncing of the cheque disentitles the

appellant from claiming any relief. We are also of the opinion

that Sunil Gupta was a necessary party and non-impleadment of

a necessary party is fatal. In the light of the aforesaid, the

appeal lacks merit and is dismissed summarily.

Sd/-

Justice Tarun Agarwala Presiding Officer

Sd/-

Dr. C.K.G. Nair Member

Sd/-

Justice M. T. Joshi Judicial Member 18.10.2019 Prepared & Compared By: PK