Ms. Sunita Gupta vs Sebi

Date of Decision: 29.04.2016

Misc. Application No. 136 of 2014 And Review Application No. 9 of 2014 In Appeal No. 56 of 2013

Ms. Sunita Gupta E-1, Model Town-II, Delhi-110 009 ...Applicant/ Original 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. Shambhu Nath Singh, Advocate for the Applicant/ Original Appellant.

Mr. Kumar Desai, Advocate with Mr. Tomu Francis, Advocate for the Respondent.

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

Per: Justice J.P. Devadhar

Misc. Application No. 136 of 2014

By this Misc. Application applicant seeks condonation of 187 days

delay in filing the Review Application. For the reasons stated in the Misc.

Application, delay is condoned.

Miscellaneous Application is disposed of accordingly. 2

Review Application No. 9 of 2014 In Appeal No. 56 of 2013

1.

By this application applicant (original appellant) seeks review of our

order passed in Appeal No. 56 of 2013 on 12.12.2013.

2. Facts relevant for the present Review Application is as follows:-

a) By a show cause notice dated 30.09.2011 the appellant

was called upon to show cause as to why penalty

should not be imposed under Section 15A(a) and

15HB of the Securities and Exchange Board of India

Act, 1992 ("SEBI Act" for short) for failure to comply

with the provisions of regulation 11(1) of the SEBI

(Stock-Brokers and Sub-Brokers) Regulations, 1992

("Stock-Brokers Regulations" for short) and Section

11C(2) & 11C(3) of the SEBI Act. It was alleged in

the show cause notice that without being registered

with SEBI as a sub-broker, the applicant had traded

through stock broker Parasram Holdings Pvt. Ltd. in

the scrip of Sumeet Industries Ltd. at Bombay Stock

Exchange Ltd. ("BSE" for short).

b) On 14.10.2011, applicant replied that prior to the date

on which the transactions were entered into, the stock

broker had submitted papers for registration as sub-

broker and therefore, the trades were as per 1992

Rules.

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c) Since applicant failed to avail opportunity of personal

hearing which was offered again and again, by an ex-

parte order dated January 23, 2013 the Adjudication

Officer ("A.O." for short) of SEBI held that the

charges were established and imposed penalty of ` 3

lac under Section 15HB of SEBI Act and penalty of

` 2 lac under Section 15A(a) of the SEBI Act.

d) On appeal filed by the applicant, this Tribunal by order

dated 12.12.2013 upheld the penalty under Section

15HB of SEBI Act by recording a finding that the

applicant had traded as a sub-broker even prior to

making application for registration as sub-broker and

that the 1992 Rules relied upon by the applicant have

been rescinded by notification dated 07.09.2006.

However, penalty imposed under Section 15A(a) of

SEBI Act was reduced from ` 2 lac to ` 1 lac.

e) Applicant filed further appeal before the Apex Court.

In the Apex Court, applicant contended that in view of

documents which were not placed before SEBI or

before this Tribunal, the penalty imposed on the

applicant cannot be sustained. Since this Tribunal had

no occasion to consider the documents which were

produced for the first time before the Apex Court, by

order dated 24.02.2014, the Apex Court permitted the

applicant to withdraw the appeal with liberty to file an 4

application before this Tribunal for being considered in

accordance with law.

f) Accordingly, the applicant by filing the present

Review Application, seeks review of our order dated

12.12.2013 and consequently deletion of penalty

imposed against the appellant.

3. Counsel for the applicant submitted that on 07.02.2001 SEBI had

granted registration certificate to the applicant to trade as a sub-broker to a

registered stock broker on the Delhi Stock Exchange and unfortunately

the said certificate was not produced before the AO. Relying on a decision

of the Delhi High Court in the case of National Stock Exchange Member

Vs. Union of India reported in (2006) 70 SCL 141 (DELHI) counsel for

the applicant submitted that once the applicant was holding a registration

certificate issued by SEBI to trade as a sub-broker on the Delhi Stock

Exchange, the question of seeking fresh registration certificate t o trade as

a sub-broker on the BSE did not arise and therefore, penalty imposed on

the applicant on the ground that the applicant has traded as an

unregistered sub-broker cannot be sustained.

4. It is true that as on date, decision of the Delhi High Court in case of

National Stock Exchange, Member (Supra) holds the field and therefore,

in view of registration certificate dated 07.02.2001, imposing penalty on

the applicant on ground that the applicant has traded as a sub-broker at

BSE without having registration certificate cannot be sustained.

5. However, as rightly contended by counsel for SEBI, the adjudication

order passed by the AO on 23.01.2013 proceeded on the footing that the 5

applicant had applied for registration certificate and even before

registration certificate was granted, the applicant had traded as a sub-

broker at the BSE which was in violation of Stock-Brokers Regulations.

The question as to whether trading on BSE, on the basis of a registration

certificate dated 07.02.2001 granted to trade on the Delhi Stock Exchange

amounts to violating any provision contained in the Stock-Brokers

Regulations (as amended) could not gone into as the case of the applicant

was not based on the registration certificate dated 07.02.2001.

6. It is relevant to note that in the present case, the basic dispute relates

to the trades executed by the applicant on behalf of clients as a sub-broker

at BSE in the scrip of Sumeet Industries Ltd. In the absence of any case

put forth by the applicant by relying on registration certificate dated

07.02.2001, decision of AO in imposing penalty on the ground that the

applicant traded on BSE as sub-broker without having registration

certificate could not be faulted. Since the applicant is now relying on the

registration certificate dated 07.02.2001, the applicant cannot be said to

have traded without registration certificate. However, trading on BSE as

sub-broker on the basis of registration certificate granted to trade on Delhi

Stock Exchange, amounts to violating the Stock-Brokers Regulations (as

amended) is a question which needs consideration. That question could

not be gone into in the original adjudication order, due to failure on part of

applicant to rely on the registration certificate dated 07.02.2001.

7. In these circumstances, we pass the following order:-

a) The Review Application is allowed and the order

passed by this Tribunal in Appeal No. 56 of 2013 on

12.12.2013 is recalled.

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b) Appeal No. 56 of 2013 is disposed of by setting aside

the ex-parte order passed by the AO of SEBI on

23.01.2013 and the matter is restored to the file of AO

for fresh decision on merits and in accordance with

law.

c) Since reliance on the registration certificate dated

07.02.2001 is placed for the first time at this belated

stage, it would be open to SEBI to issue a fresh show

cause notice to the applicant/original appellant if

deemed fit on the question that arises due to reliance

placed on registration certificate dated 07.02.2001.

8. Review Application is disposed of in the above 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 29.04.2016 Prepared & Compared By: PK