M/S. Gaurav Investments & Consultancy ... vs Sebi

Date of Decision : 01.07.2016

Appeal No. 118 of 2014

M/s. Gaurav Investments & Consultancy (Pvt) Ltd. E-265, Naraina Vihar, New Delhi - 110 028. ...Appellant

Versus

National Stock Exchange of India Limited 4th Floor, Jeevan Vihar Building, Parliament Street, New Delhi - 110 001. ...Respondent

Dr. Anurag Kumar Agarwal, Advocate for the Appellant.

Mr. Kumar Desai, Advocate with Mr. Rashid Boatwalla and Ms. Sneha Herwade, Advocates i/b Manilal Kher Ambalal & Co. for the Respondent.

WITH Appeal No. 156 of 2015

M/s. Gaurav Investments & Consultancy (Pvt) Ltd. E-265, Naraina Vihar, New Delhi - 110 028. ...Appellant

Versus

National Stock Exchange of India Limited 4th Floor, Jeevan Vihar Building, Parliament Street, New Delhi - 110 001. ...Respondent

Dr. Anurag Kumar Agarwal, Advocate for the Appellant.

Mr. Kumar Desai, Advocate with Mr. Rashid Boatwalla and Ms. Sneha Herwade, Advocates i/b Manilal Kher Ambalal & Co. for the Respondent.

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

Per : J.P. Devadhar (Oral) 2

1.

M/s. Gaurav Investments & Consultancy (Pvt) Ltd., who is appellant in

both these appeals is aggrieved by the order passed by the Disciplinary Action

Committee ('DAC' for short) of the National Stock Exchange of India Limited

('NSE' for short) on March 26, 2012 and September 11, 2012 as also the order

of the DAC of NSE dated December 3, 2013 whereby the Review Application

filed by the appellant seeking review of the aforesaid orders has been partially

allowed by dropping the order purporting to suspend the trading membership

of the appellant for 5 days and the Review Application has been rejected in so

for as it seeks to drop of the penalty imposed against the appellant.

2. Relying on a decision of the Apex Court in case of Shanker M. Nale vs.

Shiolalsingh G. Rajput reported in (1994) 2 SCC 753, counsel for NSE

submitted that in the present case, where the Review Application is rejected,

the appellant is entitled to challenge the orders passed by the DAC of NSE on

March 26, 2012 and September 11, 2012, but not the order passed on Review

Application, because, no appeal is maintainable against an order rejecting the

Review Application.

3. In view of the above submissions, counsel for the appellant gave up the

challenge to the review order and restricted his challenge to the orders passed

by the DAC of NSE on March 26, 2012 and September 11, 2012.

4. After hearing the counsel for the appellant for some time and on perusal

of the impugned orders, it is seen that the impugned orders are cryptic orders

which do not set out the argument of the appellant and do not set out the basis

for imposing penalty on the appellant.

5. In the order impugned in Appeal No. 118 of 2014 it is recorded that the

Internal Committee for Minor Actions (ICMA) has observed that the appellant 3

has wrongly reported margin / not properly accounted for the margin money

obligation as stipulated under the NSE Circulars dated February 1, 2002,

February 28, 2008, June 2, 2009 and June 30, 2009. In para 5.1.1 of the order

impugned in the Appeal No. 118 of 2014 it is recorded that the committee after

considering the acceptable instances from the submissions made by the trading

member, arrived at a conclusion that there are 54 instances of factual wrong

reporting / 6 instances of margin not properly accounted for and therefore, the

committee decided that a maximum fine of Rs. 15 lac be levied on the

appellant as per the decision made by the DAC in its meeting held on March 7,

2011.

6. The said order does not set out as to what was the factual wrong

reporting and how the appellant can be said to have violated various circulars

issued by NSE. Moreover, it is not known as to what was the decision taken on

March 7, 2011 and whether the said decision was communicated to the

appellant and if so, what was the explanation given by the appellant. Unless the

aforesaid facts are set out in the impugned order and unless reasons are

recorded for rejecting the contention of the appellant, it is impossible to decide

the correctness of the order impugned in Appeal No. 118 of 2014.

7. Similarly in Appeal No. 156 of 2015, the impugned order of DAC of

NSE is a cryptic order. Although the said order records some of the

submissions made by the appellant, the said order does not specifically set out

in detail even a single instance of wrong reporting of margin / not properly

accounting for margin by the appellant. Unless all facts are placed on record

and unless the reasons for rejecting the contention of the appellant are set out

in the impugned order, it is impossible to express any view on the impugned

order.

4

8. In these circumstances, both the impugned orders dated March 26, 2012

and September 11, 2012 are quashed and set aside and the matters are restored

to the file of DAC of NSE for fresh decision on merits and in accordance with

law.

9. DAC of the NSE is directed to pass a fresh order after giving an

opportunity of hearing to the appellant.

10. Both the 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

01.07.2016 Prepared and compared by:

msb