Order in the matter of Anand Rathi Commodities Limited

WTM/MPB/EFD-1-DRA-II/ 37 /2018 SECURITIES AND EXCHANGE BOARD OF INDIA MS. MADHABI PURI BUCH, WHOLE TIME MEMBER Order Under Regulation 28 of Securities and Exchange Board of India (Intermediaries) Regulations, 2008 In respect of Sl. No NAME PAN 1. Anand Rathi Commodities Limited AAACP6209K

In Re Inspection of Documents.

1. Anand Rathi Commodities Limited (hereinafter referred to as “ARCL” / “Noticee”) a commodity broker / member of National Spot Exchange Limited (hereinafter referred to as “NSEL”), Multi Commodity Exchange of India Ltd (hereinafter referred to as “MCX”), National Commodity & Derivatives Exchange Limited (hereinafter referred to as “NCDEX”), National Multi Commodity Exchange of India Limited (hereinafter referred to as “NMCE”), Ace Derivatives and Commodity Exchange Limited (hereinafter referred to as “ACE”) and Indian Commodity Exchange Limited (hereinafter referred to as “ICEX”).

2. Pursuant to the default at NSEL in 2012 and Economic Offences Wing’s (hereinafter referred to as “EOW”) initial investigations / arrests / complaints received from investors against the members / brokers of NSEL (including ARCL) (hereinafter collectively referred to as “Noticees”) NSEL vide complaint letters dated March 17, 2015 and March 24, 2015 and EOW via report dated April 04, 2015 had requested Securities and Exchange Board of India (hereinafter referred to as “SEBI”) to take appropriate/necessary action.

3. It is noted that on September 28, 2015, Forward Market Commission (hereinafter referred to as “FMC”) got merged with SEBI and pursuant to this merger, ARCL on December 16, 2015 had made an application to SEBI for registration as a commodity broker. Further, it is noted that as per Finance Act 2015, an intermediary may continue to buy, sell or deal in a commodity derivatives as a commodity broker, if it has made an application for such registration within a period of 3 months till the disposal of such application. Order in respect of Anand Rathi Commodities Limited

4. Further, pursuant to merger of FMC with SEBI, the regulation and supervision of the commodity derivatives brokers has been entrusted to SEBI. Therefore, in view of the abovementioned NSEL complaint letters and EOW report, SEBI had appointed Borkar & Muzumdar, Chartered Accountants (hereinafter referred to as “Auditor”) to carry out performance audit/inspection of ARCL.

5. Audit report along with Annexures were submitted by the auditor to SEBI. Based on the findings of the auditor and further analysis of the same by SEBI, it was decided by SEBI to initiate enquiry proceedings against ARCL in terms of the SEBI (Intermediaries) Regulations, 2008 (hereinafter referred to as “Intermediaries Regulations”).

6. SEBI vide order dated October 06, 2016 had appointed a Bench of Designated Authorities to enquire into the alleged violations of various provisions of the SEBI (Stock Brokers & Sub Brokers) Regulations, 1992, (hereinafter referred to as the “Brokers Regulations”), SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (hereinafter referred to as “PFUTP Regulations”), Forward Contracts (Regulation) Act, 1952, (hereinafter referred to as “FCRA”), Prevention of Money Laundering Act, 2002 (hereinafter referred to as “PMLA”), Central Government Notifications and various Circulars / Code of Conduct, Guidelines, Bye Laws, Business Rules etc. of FMC / SEBI / NSEL / NCDEX / MCX.

7. In terms of regulation 27 of the Intermediaries Regulations, the Designated Authorities vide Enquiry Report dated April 11, 2017 in respect of ARCL recommended inter alia, that the application of ARCL submitted for registration as a commodity broker may not be considered in the interest of securities market and the application of the Noticee may be rejected. Subsequently, SEBI issued Show Cause Notice dated April 24, 2017 enclosing a copy of Enquiry Report dated April 11, 2017 (hereinafter referred to as “SCN” / “Enquiry Report”) to ARCL wherein the Noticee were advised to reply to the SCN within 21 days from the receipt thereof.

8. ARCL vide letter dated May 16, 2017 had acknowledgment the receipt of SCN.

Order in respect of Anand Rathi Commodities Limited

9. ARCL vide various letters/emails dated May 16, 2017, June 05, 2017, July 07, 2017, September 12, 2017, September 14, 2017, September 20, 2017 September 21, 2017, October 05, 2017, October 23, 2017, November 21, 2017, January 03, 2018, January 23, 2018 and February 20, 2018 etc. had sought inspection of documents as well as copies of documents and submitted that SEBI has not provided complete inspection of all relevant documents to them. However, SEBI submitted that it had granted inspection to ARCL on February 22, 2018 and copies of all relied upon documents were also provided to ARCL through various letters dated August 29, 2017, September 13, 2017, November 08, 2017 and January 05, 2018.

10. In the interest of natural justice and as per regulation 28(2) of Intermediaries Regulations, the Noticee was granted an opportunity of personal hearing on January 31, 2018 at SEBI, Head Office, Mumbai vide notice of hearing dated December 26, 2017.

11. Further, the Noticee vide various aforesaid letters stated that the documents sought were required by them to finalize their reply and hence requested to grant an opportunity of hearing only after receipt of their detailed reply in the matter. In this regard, the Noticee had also cited the Order of Hon’ble Supreme Court in the matter of SEBI v. Price Waterhouse (Civil Appeal No. 6001 – 6002 and 6003-6004 of 2012 decided on 10.01.2017) wherein Supreme Court had held that a party before SEBI is entitled to get all the material on SEBI’s record.

12. ARCL vide letter dated January 23, 2018 had stated that the inspection of documents has not been completed and requested to grant the inspection of documents and also requested to adjourn the scheduled hearing. ARCL further stated that adequate time from the date of completion of inspection be given to them to submit their detailed reply.

13. In view of the stand of SEBI that it has granted inspection of all relied upon documents and the stand of the Noticee that they are entitled to get additional documents and their request that a hearing be fixed only after they file detailed reply based on all the requested documents, in order to overcome the impasse resulting from the conflicting stands, SEBI vide email dated January 25, 2018 informed the Noticee that the hearing scheduled would be in respect of inspection of documents. Further, SEBI vide email dated February 15, 2018 has re-scheduled the hearing to February 27, 2018. Order in respect of Anand Rathi Commodities Limited

14. On February 27, 2018 Mr. Pradeep Sancheti, Senior Counsel, Mr. Vaibhav Singh, Ms. Sukriti Jaiswal, Mr. Saurabh Bachhawat, Advocates from Shardul Amarchand Mangaldas & Co. along with Mr. Vasudev Gerewal, Asst. Vice President of ARCL, Authorized Representatives (hereinafter referred to as “ARs”) of ARCL appeared for the hearing. ARs made their oral submission with respect to inspection of documents. The matter was heard at length.

15. During the hearing, ARs of ARCL stated that ARCL has sought for inspection of documents as well as copies of documents by their various letters/emails and submitted that SEBI has not provided complete inspection of all relevant documents to them, whereas SEBI states that all relied upon documents were provided to ARCL vide inspection granted on February 22, 2018 and copies of documents were also provided to ARCL through various letters dated August 29, 2017, September 13, 2017, November 08, 2017 and January 05, 2018.

16. During the course of hearing ARs were advised to submit their rationale for seeking various additional documents in the matter. ARs submitted that the rationale for seeking the documents is based on three categories viz., (A) Documents necessary for dealing with the issue of jurisdiction (B) Documents necessary for dealing with the issue of discrimination and (C) Documents relating to the merits of the case referred to or relied upon in the Enquiry Report. ARs once again submitted the list of below mentioned documents of which inspection / copies were not provided to ARCL. ARs explained the rationale/relevance of seeking inspection of below mentioned documents. ARs further stated that complete inspection of all documents as well as copies of the same are required to make a comprehensive reply to SCN as the said documents relate to the specific averments/allegations made in the SCN. Detailed item by item discussion held during the hearing was as follows:

Order in respect of Anand Rathi Commodities Limited “……… Table No. 1

S. No. Documents/information sought Observations and Conclusion 1. Copy of documents that show that During the hearing, ARCL did not contest / press for allegedly suspicious trading were discussion on this item in view of the inspection availed not reported to Financial by ARCL on February 22, 2018. Intelligence Unit (FIU) and clients traded in volume that were highly However, SEBI states that copy of EOW Interim report disproportionate to their income dated April 04, 2015, (EOW Report), Complaints dated levels [Clause 6(a) of letter dated March 17, 2015 and March 24, 2015 by NSEL (NSEL September 14, 2017] Complaints), Audit Reports and annexures attached to it, were already provided to ARCL. Further, ARCL is directed to refer Enquiry Report including paragraphs 104, 105 and 106 of Enquiry Report. SEBI’s stand on the same stands confirmed / clarified. 2. Copy of documents to show that During the hearing, ARCL did not contest / press for ARCL allegedly funded its clients discussion on this item in view of the inspection availed through its NBFC. [Clause 6(b) of by ARCL on February 22, 2018. letter dated September 14, 2017] However, SEBI states that copy of EOW Report, NSEL Complaints and Audit Reports and annexures attached to it were already provided to ARCL. Further, ARCL is directed to refer Enquiry Report including paragraphs 104, 105 and 106 of Enquiry Report. SEBI’s stand on the same stands confirmed / clarified. 3. Copy of letter/email of FMC calling ARCL explained that the trade data is required to see how spot exchanges including NSEL for many members of NSEL has traded. submission of trade data in prescribed reporting format. SEBI states that the copy of letter was provided to ARCL [Clause 6(c) of letter dated on November 08, 2017. Fresh copy of letter was provided September 14, 2017] to ARCL during the inspection held on February 22, 2018. SEBI further explained that the requested primary

Order in respect of Anand Rathi Commodities Limited

S. No. Documents/information sought Observations and Conclusion data has not been relied upon by the SEBI in the SCN / enquiry report.

This issue leads to discrimination. SEBI clarified to ARCL that the selection of 5 brokers including ARCL was on the basis of objective criteria viz., based on 2 documents i.e. EOW report and NSEL complaint, copies of which were already provided to ARCL.

Further, it was clarified by SEBI that at the moment, qua the NSEL matter, no proceedings have been initiated against any other brokers (other than the 5 brokers) or any investors; however, SEBI has the power to initiate any proceedings in future as it deems fit.

Given this unequivocal stand by SEBI, ARCL has all the information it needs to make its representations qua the issue of discrimination and would not be disadvantaged in any way without access to the additional documents/information in this regard.

SEBI’s stand on the same stands confirmed / clarified. 4. Trade data submitted by NSEL to ARCL stated that the trade data for 2 or 3 months will FMC. [Clause 6(d) of letter dated show that FMC collected the data and did not act upon September 14, 2017] the said data.

SEBI states that the primary trade data has not been relied upon by SEBI in the SCN / enquiry report.

It has been explained to ARCL that on February 06, 2012 Department of Consumer Affairs (DCA) appointed FMC as designated Agency and in April 2012 FMC issued SCN to NSEL.

SEBI’s stand on the same stands confirmed / clarified.

Order in respect of Anand Rathi Commodities Limited

S. No. Documents/information sought Observations and Conclusion 5. Copy of email dated February 7, During the hearing, ARCL did not contest / press for 2017 from the market discussion on this item in view of the inspection availed intermediaries' registration and by ARCL on February 22, 2018. supervision department of SEBI to the designated authorities. [Clause However, SEBI states that the copy was provided to 6(e) of letter dated September 14, ARCL on August 28, 2017 and September 13, 2017. Fresh 2017] copy was provided to ARCL during the inspection held on February 22, 2018.

SEBI’s stand on the same stands confirmed / clarified. 6. Documents proving that During the hearing SEBI clarified that all the "illegalities of the transactions communication was to NSEL and not to any members of carried out" in NSEL by brokers NSEL. were pointed out by FMC and Ministry of Consumer Affairs. However, SEBI further states that Copies of relevant [Clause 6(f) of letter dated correspondences between NSEL, FMC, DCA etc, were September 14, 2017] provided to ARCL on August 29, 2017, September 13, 2017 and November 08, 2017. Annexure VI to FMC order was provided to ARCL on August 29, 2017. Fresh copy was provided to ARCL during the inspection held on February 22, 2018.

SEBI’s stand on the same stands confirmed / clarified. 7. Basis for alleging that ARCL acted SEBI states that inference was drawn from documents in complicity with NSEL. [Clause such as Audit reports and annexures attached to it, NSEL 6(g) of letter dated September 14, complaints, EOW Report, FMC order etc. The same were 2017] already provided to ARCL on August 29, 2017, September 13, 2017.

SEBI’s stand on the same stands confirmed / clarified. 8. Basis for alleging that UCC During the hearing, ARCL did not contest / press for modification are not in line with discussion on this item in view of the inspection availed circular dated July 08, 2011. by ARCL on February 22, 2018. [Clause 6(h) of letter dated September 14, 2017]

Order in respect of Anand Rathi Commodities Limited

S. No. Documents/information sought Observations and Conclusion However, SEBI states that copy of EOW Report, NSEL complaints, Audit Reports and annexures attached to it and analysis made by SEBI on the same were already provided to ARCL.

SEBI’s stand on the same stands confirmed / clarified. 9. Offer letter to NSEL by the seller During the hearing, ARCL did not contest / press for with reference to short term discussion on this item in view of the inspection availed contract. [Clause 6(s) of letter by ARCL on February 22, 2018. dated September 14, 2017] However, SEBI states that the same was not relied upon in the SCN. SEBI further states that the said document was attached as exhibit-40 of Grant Thornton report. Grant Thornton report and all exhibits attached to it was already provided to ARCL.

SEBI’s stand on the same stands confirmed / clarified. 10. Issuance of ware house receipt by During the hearing, ARCL did not contest / press for NSEL. [Clause 6(t) of letter dated discussion on this item in view of the inspection availed September 14, 2017] by ARCL on February 22, 2018.

However, SEBI states that the same was not relied upon in the SCN / enquiry report.

SEBI’s stand on the same stands confirmed / clarified. 11. Minutes of the proceedings of the During the hearing, ARCL did not contest / press for board meeting of the board of discussion on this item in view of the inspection availed directors of NSEL dated December by ARCL on February 22, 2018. 19, 2009. [Clause 6(v) of letter dated September 14, 2017] However, SEBI states that the copy of minutes were already provided to ARCL in CD.

SEBI’s stand on the same stands confirmed / clarified.

Order in respect of Anand Rathi Commodities Limited

S. No. Documents/information sought Observations and Conclusion 12. Minutes of the Board meeting of During the hearing, ARCL did not contest / press for FTIL dated January 29, 2010. discussion on this item in view of the inspection availed [Clause 6(w) of letter dated by ARCL on February 22, 2018. September 14, 2017] However, SEBI states that the copy of minutes were already provided to the ARCL in CD.

SEBI’s stand on the same stands confirmed / clarified. 13. Annual Report of NSEL for the During the hearing, ARCL did not contest / press for period from 2005-06 to 2012-13. discussion on this item in view of the inspection availed [Clause 6(x) of letter dated by ARCL on February 22, 2018. September 14, 2017] However, SEBI states that the same were already provided to the ARCL in CD.

SEBI’s stand on the same stands confirmed / clarified. 14. Documents of information provided SEBI states that copy of reply filed by then Director of by the then MD of NSEL dated NSEL, Joseph Messy was provided to ARCL during the September 13, 2013. [Clause 6(z) inspection held on February 22, 2018. of letter dated September 14, 2017] SEBI’s stand on the same stands confirmed / clarified. 15. Copy of minutes of Committee of SEBI informed to ARCL that copy of Audit Reports and Inter Division Chiefs of SEBI that annexures attached to it, analysis made by SEBI on the has considered the investigation same and Enquiry Report were already provided to report. [Clause 6(ee) of letter dated ARCL. September 14, 2017] SEBI’s stand on the same stands confirmed / clarified. 16. Dates on which Committee of Inter SEBI informed to ARCL that copy of Audit Reports and Division Chiefs of SEBI had annexures attached to it, analysis made by SEBI on the considered the findings of same and Enquiry Report were already provided to Investigation. [Clause 6(fl) of letter ARCL. dated September 14, 2017] SEBI’s stand on the same stands confirmed / clarified.

Order in respect of Anand Rathi Commodities Limited

S. No. Documents/information sought Observations and Conclusion 17. Names of all the other trading It is noted that this issue leads to discrimination. SEBI’s members to whom any Show Cause clarification is same as Sr. no. 20 below of this table. Notice has been issued by SEBI in NSEL matter. [Clause 6(gg) of SEBI’s stand on the same stands confirmed / clarified. letter dated September 14, 2017] 18. Names of all the other It is noted that this issue leads to discrimination. SEBI’s individuals/listed companies to clarification is same as Sr. no. 20 below of this table. whom any Show Cause Notice has been issued by SEBI in this matter SEBI’s stand on the same stands confirmed / clarified. (if any). [Clause 6(hh) of letter dated September 14, 2017] 19. Copy of files/evidence indicating During the hearing, ARCL did not contest / press for unauthorized trading done by discussion on this item in view of the inspection availed ARCL on behalf of its client. by ARCL on February 22, 2018. [Clause 6(ii) of letter dated September 14, 2017] However, SEBI states that inference was drawn from documents such as Audit reports and annexures attached to it, NSEL complaints, EOW Report, FMC order etc. The same were already provided to ARCL on August 29, 2017, September 13, 2017. The same was also informed to ARCL during the inspection held on February 22, 2018. Further, ARCL is directed to refer Enquiry Report including paragraphs 98 to 101 of Enquiry Report.

SEBI’s stand on the same stands confirmed / clarified.

20. Details of all inspection carried by ARCL states that this information/documents leads to FMC pertaining to Commodity issue of discrimination. Spot Exchange/s or any recognized Commodities Exchange including SEBI clarified to ARCL that the selection of 5 brokers the period which inspection was including ARCL was on the basis of objective criteria viz., carried out, date of inspection of based on 2 documents i.e. EOW report and NSEL the notice. [Clause 6(jj) of letter complaint, copies of which were already provided to dated September 14, 2017] ARCL.

Order in respect of Anand Rathi Commodities Limited

S. No. Documents/information sought Observations and Conclusion

Further, it was clarified by SEBI that at the moment, qua the NSEL matter, no proceedings have been initiated against any other brokers (other than the 5 brokers) or any investors; however, SEBI has the power to initiate any proceedings in future as it deems fit.

Given this unequivocal stand by SEBI, ARCL has all the information it needs to make its representations qua the issue of discrimination and would not be disadvantaged in any way without access to the additional documents/information in this regard.

SEBI’s stand on the same stands confirmed / clarified.

21. Details of Bank statement relied During the hearing, ARCL did not contest / press for upon by SEBI auditor covered by discussion on this item in view of the inspection availed such inspection. [Clause 6(kk) of by ARCL on February 22, 2018. letter dated September 14, 2017] However, SEBI states that as stated in the Enquiry Report, the broker has refused to provide documents/access to documents related to bank account of clients to auditors appointed by SEBI. The same was also informed to ARCL during the inspection held on February 22, 2018.

SEBI’s stand on the same stands confirmed / clarified. 22. Complete list of all members of ARCL states that this information/documents leads to NSEL. [Clause 6(ll) of letter dated issue of discrimination. September 14, 2017] SEBI’s clarification is same as Sr. no. 20 above of this table. 23. Out of the above, list of NSEL ARCL states that this information/documents leads to members who have been granted issue of discrimination. registration by SEBI in any SEBI’s clarification is same as Sr. no. 20 above of this table.

Order in respect of Anand Rathi Commodities Limited

S. No. Documents/information sought Observations and Conclusion capacity. [Clause 6(mm) of letter dated September 14, 2017] 24. List of NSEL brokers who have ARCL states that this information/documents leads to been denied registration by SEBI issue of discrimination. pursuant to its application to SEBI SEBI’s clarification is same as Sr. no. 20 above of this in any capacity. [Clause 6(nn) of table. letter dated September 14, 2017] 25. Total number of investors who had ARCL states that this information/documents leads to traded on NSEL. [Clause 6(oo) of issue of discrimination. letter dated September 14, 2017] SEBI’s clarification is same as Sr. no. 20 above of this table. 26. Number of entities out of, above ARCL states that this information/documents leads to (i.e. investor) against whom any issue of discrimination. proceedings have been initiated in SEBI’s clarification is same as Sr. no. 20 above of this the context of their trading on table. NSEL. [Clause K(pp) of letter dated September 14, 2017] 27. Total number of defaulters who had ARCL states that this information/documents leads to traded on NSEL from the date of issue of discrimination. commencement of operation of SEBI’s clarification is same as Sr. no. 20 above of this NSEL. [Clause 6(qq) of letter dated table. September 14, 2017] 28. Number of defaulters out of above ARCL states that this information/documents leads to against whom any proceedings issue of discrimination. have been initiated by SEBI. SEBI’s clarification is same as Sr. no. 20 above of this [Clause 6(rr) of letter dated table. September 14, 2017] 29. Copies of replies/affidavits filed by ARCL states that this document is required to understand SEBI in any High court in the jurisdiction of SEBI on NSEL. context of any case related to NSEL. [Clause 6(ss) of letter dated SEBI is instructed to convey their stand with respect to September 14, 2017] the same.

It is clarified by SEBI that since ARCL has applied to SEBI, for the purpose of granting registration to ARCL to Order in respect of Anand Rathi Commodities Limited

S. No. Documents/information sought Observations and Conclusion act as a commodity broker, SEBI has jurisdiction to determine whether ARCL is a fit and proper person to act as a commodity broker. SEBI further states that the existence or absence of jurisdiction is determined only by statute.

Thus, ARCL is not disadvantaged in any way without access to the additional documents/information sought in this regard.

SEBI further explained that the requested document has not been relied upon by the SEBI in the SCN / enquiry report.

SEBI’s stand on the same stands confirmed / clarified.

30. Copies of Agenda Note and minutes ARCL states that this information/documents leads to of SEBI Board related to merger of issue of jurisdiction. FMC with SEBI and any aspect of SEBI’s clarification is same as Sr. no. 29 above of this NSEL matter. [Clause 6 (vv) of table. letter dated September 14, 2017] 31. Complete details of proceeding if ARCL states that this information/documents leads to any initiated by SEBI against issue of discrimination. depositories in the context of & SEBI’s clarification is same as Sr. no. 20 above of this with reference to-NSEL matter and table. trading in NSEL. [Clause 6(ww) of letter dated September 14, 2017] 32. Details of proceeding if any ARCL states that this information/documents leads to initiated against clearing member issue of discrimination. by SEBI in the context of & with SEBI’s clarification is same as Sr. no. 20 above of this reference to NSEL matter and table. trading in NSEL. [Clause 6(xx) of letter dated September 14, 2017]

Order in respect of Anand Rathi Commodities Limited

S. No. Documents/information sought Observations and Conclusion 33. Names of NSEL brokers and ARCL states that this information/documents leads to persons of such NSEL brokers issue of discrimination. against whom a look out notice SEBI’s clarification is same as Sr. no. 20 above of this issued by EOW of Mumbai Police table. in context of NSEL matter. [Clause 6 (yy) of letter dated September 14, SEBI states that the information sought by ARCL is not 2017] relied upon in the SCN / enquiry report. The same was also informed to ARCL during the inspection held on February 22, 2018.

SEBI’s stand on the same stands confirmed / clarified. 34. List of top 100 NSEL brokers by ARCL states that this information/documents leads to turnover for each settlement cycle issue of discrimination. and their turnover in figure. SEBI’s clarification is same as Sr. no. 20 above of this [Clause 6(zz) of letter dated table. September 14, 2017] SEBI states that the information sought by ARCL is not relied upon in the SCN / enquiry report. The same was also informed to ARCL during the inspection held on February 22, 2018.

SEBI’s stand on the same stands confirmed / clarified. 35. Complete copy of material During the hearing, ARCL did not contest / press for considered by Board/WTM while discussion on this item in view of the inspection availed ordering of appointment of by ARCL on February 22, 2018. Designated Authorities in our matter including relevant file notes However, SEBI explained that file notings are for by SEBI. [Clause 6(aaa) of letter internal purpose. For the said item, EOW Report, NSEL dated September 14, 2017] Complaints, Auditor Reports and annexures attached to it and relevant analysis made by SEBI on the same were already provided to ARCL. The same was also informed to ARCL during the inspection held on February 22, 2018.

SEBI’s stand on the same stands confirmed / clarified.

Order in respect of Anand Rathi Commodities Limited

S. No. Documents/information sought Observations and Conclusion 36. Documents which shows that ARCL During the hearing, ARCL did not contest / press for actively promoted the products of discussion on this item in view of the inspection availed NSEL. [Clause 6(bbb) of letter by ARCL on February 22, 2018. dated September 14, 2017]. However, SEBI states that for the said item, EOW Report, NSEL Complaints, Auditor Reports and annexures to the reports including the PPT were already provided to ARCL.

The same was also informed to ARCL during the inspection held on February 22, 2018.

SEBI’s stand on the same stands confirmed / clarified. 37. Documents on the basis of which During the hearing, ARCL did not contest / press for statement is made in the report that discussion on this item in view of the inspection availed ARCL has made wrong statement in by ARCL on February 22, 2018. marketing material regarding sufficient settlement guarantee fund However, SEBI states that for the said item, EOW Report, of exchange. [Clause 6(ccc) of NSEL Complaints, Auditor Reports and annexures to the letter dated September 14, 2017] reports including the PPT were already provided to ARCL.

The same was also informed to ARCL during the inspection held on February 22, 2018.

SEBI’s stand on the same stands confirmed / clarified. 38. Documents/evidence gathered by During the hearing, ARCL did not contest / press for SEBI in the course of its discussion on this item in view of the inspection availed investigation, including but not by ARCL on February 22, 2018. limited to the statements of various persons, recorded by SEBI. [Clause However, SEBI states that for said item copy of Audit 6 (ggg) of letter dated September Reports and annexures attached to it, analysis made by 14, 2017] SEBI on the same and Enquiry Report were already provided to ARCL.

Order in respect of Anand Rathi Commodities Limited

S. No. Documents/information sought Observations and Conclusion The same was also informed to ARCL during the inspection held on February 22, 2018.

SEBI’s stand on the same stands confirmed / clarified. 39. Documents in support of contention During the hearing, ARCL did not contest / press for that SCN to NSEL dated April 27, discussion on this item in view of the inspection availed 2012 by Ministry of Consumer by ARCL on February 22, 2018. Affairs was in public knowledge and when was this sent to brokers However, SEBI states that for the said item, copy of and investors. [Clause 6(www) of Annexure X to the FMC order and copy of news article letter dated September 14, 2017] were provided to ARCL during the inspection held on February 22, 2018. SEBI further clarified that news of SCN was in public domain. SEBI’s stand on the same stands confirmed / clarified. 40. Details of the inspection and other During the hearing, ARCL did not contest / press for documents in support of the discussion on this item in view of the inspection availed contention that "if upon inspection, by ARCL on February 22, 2018. certain discrepancies / violations of provisions of law are observed" However, SEBI states that for the said item, Audit Reports (para 31 of Report of Designated and annexures to the reports including the PPT were Authority) Details of presentations already provided to ARCL. and emails purportedly sent by ARCL to clients that contained The same was also informed to ARCL during the false assurance, wrongful & inspection held on February 22, 2018. misleading statements etc. [Clause 6(xxx) of letter dated September 14, SEBI’s stand on the same stands confirmed / clarified. 2017] 41. Basis of arriving to a conclusion During the hearing, ARCL did not contest / press for that that the alleged misleading discussion on this item in view of the inspection availed presentation were circulated after by ARCL on February 22, 2018. NSEL was directed by FMC to withdraw from its website, However, SEBI states that for the said item, copy of letter statement that "it was regulated by dated February 14, 2013 issued by NSEL to FMC and letter dated July 12, 2013 issued by DCA to NSEL were Order in respect of Anand Rathi Commodities Limited

S. No. Documents/information sought Observations and Conclusion FMC". [Clause 6(yyy) of letter provided to ARCL during the inspection held on dated September 14, 2017] February 22, 2018.

SEBI’s stand on the same stands confirmed / clarified. 42. Documents to substantiate that the During the hearing, ARCL did not contest / press for ARCL were allowing short sell. discussion on this item in view of the inspection availed [Clause 6(zzz) of letter dated by ARCL on February 22, 2018. September 14, 2017] However, SEBI states that for the said item, copies of EOW Report, NSEL Complaints, Auditor Reports and annexures to the reports including the PPT, FMC Order and Annexures to FMC order were already provided to ARCL.

The same was also informed to ARCL during the inspection held on February 22, 2018.

SEBI’s stand on the same stands confirmed / clarified. 43. Documents / material to ARCL stated that during inspection, SEBI referred to substantiate that "the illegalities of three letters towards this issue. However, only two letters the transactions carried out at were given and letter dated February 29, 2012 was not NSEL by the brokers were time and given. again pointed out by both FMC and the Ministry of Consumer Affairs." During the hearing SEBI clarified that all the [Clause 6(aaaa) of letter dated communication was to NSEL and not to any members of September NSEL. 14, 2017] SEBI states that copy of Annexure VI (relevant correspondences between NSEL, FMC, DCA etc, i.e. FMC letter dated February 22, 2012 & April 10, 2012, DCA letter dated April 27, 2012 and NSEL letter dated February 29, 2012) to FMC order were provided to ARCL on August 29, 2017. Fresh copies of said letter was provided to ARCL during the inspection held on February 22, 2018.

Order in respect of Anand Rathi Commodities Limited

S. No. Documents/information sought Observations and Conclusion

SEBI further state that the NSEL letter dated February 29, 2012 was provided to ARCL on November 08, 2017.

SEBI’s stand on the same stands confirmed / clarified. 44. Material / documents under NSEL During the hearing, ARCL did not contest / press for bye laws / circulars to substantiate discussion on this item in view of the inspection availed that the brokers were obliged to by ARCL on February 22, 2018. verify warehouse receipts and conduct due diligence. [Clause However, SEBI states that inference was drawn from 6(bbbb) of letter dated September documents such as EOW Report, NSEL Complaints, 14, 2017] Auditor Reports and annexures to the reports including the PPT, FMC Order and Annexures to FMC order and other relevant documents such as SGS Report, Grant Thornton Report. The copies of said documents were already provided to ARCL.

The same was also informed to ARCL during the inspection held on February 22, 2018.

SEBI’s stand on the same stands confirmed / clarified. 45. Material / documents to draw an During the hearing, ARCL did not contest / press for inference that ARCL had discussion on this item in view of the inspection availed knowledge about non-availability by ARCL on February 22, 2018. of goods at exchange warehouse. [Clause 6(cccc) of letter dated However, SEBI states that inference was drawn from September 14, 2017] documents such as EOW Report, NSEL Complaints, Auditor Reports and annexures to the reports including the PPT, FMC Order and Annexures to FMC order and other relevant documents such as SGS Report, Grant Thornton Report. Copies of said documents were already provided to ARCL.

The same was also informed to ARCL during the inspection held on February 22, 2018.

Order in respect of Anand Rathi Commodities Limited

S. No. Documents/information sought Observations and Conclusion

SEBI’s stand on the same stands confirmed / clarified.

46. Business Rules of NSEL (Appendix SEBI may provide the same to ARCL. 1 - Investors Rights and Obligations, i.e. Clause 6 of Appendix 1). [Clause 6 (dddd) of letter dated September 14, 2017] 47. Document to substantiate that the During the hearing, ARCL did not contest / press for Auditors had sought bank account discussion on this item in view of the inspection availed statement/s (particularly client's by ARCL on February 22, 2018. bank statement) and ARCL refusal to provide same. [Clause 6(eeee) of However, SEBI states that Enquiry Report had relied letter dated September 14, 2017] upon the Auditor's comments mentioned in the audit report. The same was also informed to ARCL during the inspection held on February 22, 2018.

SEBI’s stand on the same stands confirmed / clarified. 48. Copy of the Approved Investigation During the hearing, ARCL did not contest / press for Report (if any). [Clause 6(gggg) of discussion on this item in view of the inspection availed letter dated September 14, 2017] by ARCL on February 22, 2018.

However, SEBI states that for said item copy of Audit Reports and annexures attached to it, analysis made by SEBI on the same and Enquiry Report were already provided to ARCL.

SEBI’s stand on the same stands confirmed / clarified. 49. Analysis carried out by SEBI During the hearing, ARCL did not contest / press for pursuant to the Audit Report as also discussion on this item in view of the inspection availed the post inspection analysis of by ARCL on February 22, 2018. SEBI. [Clause 6(jjjj) of letter dated September 14, 2017] However, SEBI states that post audit report analysis done by SEBI was provided to ARCL on September 13, 2017.

Order in respect of Anand Rathi Commodities Limited

S. No. Documents/information sought Observations and Conclusion The same was also informed to ARCL during the inspection held on February 22, 2018.

SEBI’s stand on the same stands confirmed / clarified. 50. Copy of order dated October 06, During the hearing, ARCL did not contest / press for 2016. [Clause 6(kkkk) of letter discussion on this item in view of the inspection availed dated September 14, 2017] by ARCL on February 22, 2018.

SEBI explained that file notings are for internal purpose. SEBI further states that Copy of relevant/crystalized portion of the file noting was provided to ARCL during the inspection held on February 22, 2018.

SEBI’s stand on the same stands confirmed / clarified. 51. Copy of FMC documents During the hearing, ARCL did not contest / press for identifying that contract offered for discussion on this item in view of the inspection availed trade on NSEL were in violation of by ARCL on February 22, 2018. provision of FCRA. [Clause 6(llll ) of letter dated September 14, 2017] However, SEBI states that for the said item, copies of EOW Report, NSEL Complaints, Auditor Reports, annexures to the reports including the PPT, FMC Order and Annexures to FMC order and other relevant documents such as SGS Report, Grant Thornton Report were already provided to ARCL. The same was also informed to ARCL during the inspection held on February 22, 2018.

SEBI’s stand on the same stands confirmed / clarified. 52. Legal Agreement dated October 10, During the hearing, ARCL did not contest / press for 2012 between NSEL and NCS discussion on this item in view of the inspection availed Sugars Ltd. [Clause 6(pppp) of by ARCL on February 22, 2018. letter dated September 14, 2017] However, SEBI states that the information sought was not relied upon in the SCN / enquiry report.

Order in respect of Anand Rathi Commodities Limited

S. No. Documents/information sought Observations and Conclusion The same was also informed to ARCL during the inspection held on February 22, 2018.

SEBI’s stand on the same stands confirmed/ clarified. 53. Minutes of the Board Meeting During the hearing, ARCL did not contest / press for relating to registration of IBMA discussion on this item in view of the inspection availed dated August 3, 2009. [Clause by ARCL on February 22, 2018. 6(qqqq) of letter dated September 14, 2017] However, SEBI states that enquiry report / SCN does not mention about the same and the information sought is not relied upon in the SCN / enquiry report. The same was also informed to ARCL during the inspection held on February 22, 2018.

SEBI’s stand on the same stands confirmed/ clarified. 54. Engagement letter defining the During the hearing, ARCL did not contest / press for scope of work of auditor Grant discussion on this item in view of the inspection availed Thornton Letter dated August 27, by ARCL on February 22, 2018. 2013 addressed to NSEL and confirmed by FMC. [Clause 6 SEBI states that Copy of Grant Thornton report along (uuuu) of letter dated September with the annexures were provided to ARCL on August 28, 14, 2017] 2017. Fresh copy of the same was provided to ARCL during the inspection held on February 22, 2018.

SEBI’s stand on the same stands confirmed / clarified. 55. Documents of communication During the hearing, ARCL did not contest / press for dated November 20, 2013 to discussion on this item in view of the inspection availed Jignesh Shah and others in Fit & by ARCL on February 22, 2018. Proper proceedings. [Clause 6(vvvv) of letter dated September However, SEBI states that enquiry report / SCN does not 14, 2017] mention about the same and the information sought was not relied upon in the SCN / enquiry report. The same was also informed to ARCL during the inspection held on February 22, 2018.

Order in respect of Anand Rathi Commodities Limited

S. No. Documents/information sought Observations and Conclusion SEBI’s stand on the same stands confirmed / clarified.

56. Written submission dated During the hearing, ARCL did not contest / press for December 06, 2013 made by discussion on this item in view of the inspection availed Jignesh Shah & others in FMC, Fit by ARCL on February 22, 2018. & Proper proceedings. [Clause 6(xxxx) of letter dated September However, SEBI states that enquiry report / SCN does not 14, 2017] mention about the same and the information sought was not relied upon in the SCN / enquiry report. The same was also informed to ARCL during the inspection held on February 22, 2018.

SEBI’s stand on the same stands confirmed / clarified. 57. Full and complete details of all During the hearing, ARCL did not contest / press for evidence in support of SEBI's discussion on this item in view of the inspection availed observation that the long term by ARCL on February 22, 2018. contracts...: -were not backed by actual physical delivery.' [Clause However, SEBI states that for the said information, copy 6(aaaaa) of letter dated September of SGS report, Grant Thornton Report, EOW Report, 14, 2017] FMC order and annexures annexed to Audit Reports and FMC order were provided to ARCL on November 08, 2017. The same was also informed to ARCL during the inspection held on February 22, 2018.

SEBI’s stand on the same stands confirmed / clarified. 58. Full and complete details of such During the hearing, ARCL did not contest / press for various communication being discussion on this item in view of the inspection availed relied by SEBI in support of the by ARCL on February 22, 2018. allegation, "the noticee has also forwarded various communications However, SEBI states that for the said information, pertaining to new contracts copies of EOW Report, NSEL Complaints, Auditor launched..." [Clause 6(bbbbb) of Reports and annexures to the reports including the PPT letter dated September 14, 2017] were already provided to ARCL. The same was also informed to ARCL during the inspection held on February 22, 2018. Order in respect of Anand Rathi Commodities Limited

S. No. Documents/information sought Observations and Conclusion

SEBI’s stand on the same stands confirmed / clarified. 59. Internal note/s, minutes of meeting During the hearing, ARCL did not contest / press for etc. during 2009 - 2011 on UCC discussion on this item in view of the inspection availed modification/imposition of penalty by ARCL on February 22, 2018. etc. [Clause 6(eeeee) of letter dated September 14, 2017] SEBI explained that file notings, if any, are for internal purpose. SEBI further states that for the purpose for findings/allegation on UCC modification mentioned in the SCN/ Enquiry report, the information sought i.e. minutes of meeting was not relied upon in the SCN / enquiry report.

The same was also informed to ARCL during the inspection held on February 22, 2018.

SEBI’s stand on the same stands confirmed / clarified. 60. Internal note/s, minutes of meeting During the hearing, ARCL did not contest / press for etc. on Presentations, Marketing discussion on this item in view of the inspection availed material, by ARCL on February 22, 2018. recommendations etc. [Clause 6(fffff) of letter dated September 14, SEBI explained that file notings, if any, are for internal 2017] purpose.

SEBI’s stand on the same stands confirmed / clarified. 61. Complete copy of material During the hearing, ARCL did not contest / press for considered by Board/WTM while discussion on this item in view of the inspection availed ordering of appointment of by ARCL on February 22, 2018. Designated Authorities in our matter including relevant file notes However, SEBI states that copies of EOW Report, NSEL by SEBI. Also, file notings relating complaints, FMC order, Audit Reports, annexures to the to proposal and approval for reports including the PPT and analysis made by SEBI on initiation of Enquiry proceedings the same and all other relevant documents which form the by designated authorities in the basis of materials considered by Board/WTM while

Order in respect of Anand Rathi Commodities Limited

S. No. Documents/information sought Observations and Conclusion said matter. (para 3 of letter dated ordering of appointment of Designated Authorities were September 20, 2017) already provided to ARCL. The same was also informed to ARCL during the inspection held on February 22, 2018. SEBI further explained that file notings are for internal purpose.

SEBI’s stand on the same stands confirmed / clarified. 62. Copy of file notings recording the SEBI explained that file notings are for internal purpose. approval for appointment of the SEBI further states that Letter dated February 18, 2016 auditor by SEBI to look into our and April 04, 2016 for appointment of the Auditor and trading on National Spot Exchange additional terms of references were provided already to Limited.(NSEL) (as per letter dated ARCL during inspection held on February 22, 2018. October 05, 2017). SEBI’s stand on the same stands confirmed / clarified. 63. Any documents indicating that This information / documents leads to issue of SEBI, at any given point of time had Jurisdiction. Jurisdiction over NSEL (as per our letter dated October 05, 2017). It is clarified by SEBI that since ARCL has applied to SEBI, for the purpose of granting registration to ARCL to act as a commodity broker, SEBI has jurisdiction to determine whether ARCL is a fit and proper person to act as a commodity broker. SEBI further states that the existence or absence of jurisdiction is determined only by statute. Thus, ARCL is not disadvantaged in any way without access to the additional documents/information sought in this regard.

SEBI’s stand on the same stands confirmed / clarified. 64. Any documents indicating that This information / documents leads to issue of FMC, at any point, had jurisdiction Jurisdiction. to take any action against the brokers of NSEL (as per our letter SEBI’s clarification is same as Sr. no. 63 above of this dated October 05, 2017). table.

Order in respect of Anand Rathi Commodities Limited

S. No. Documents/information sought Observations and Conclusion 65. Copy of file notings of SEBI dealing SEBI explained that file notings are for internal purpose. with the Audit Report of M/s SEBI further states that Letter dated February 18, 2016 Mazumdar Chartered Accountant and April 04, 2016 for appointment of the Auditor and (as per our letter dated October 05, additional terms of references were provided to ARCL 2017). during the inspection held on February 22, 2018.

SEBI’s stand on the same stands confirmed / clarified. 66. Copy of file notings approving During the hearing, ARCL did not contest / press for letter dated October 06, 2016 for discussion on this item in view of the inspection availed appointing the Designated by ARCL on February 22, 2018. Authorities (as per our letter dated October 05, 2017). SEBI explained that file notings are for internal purpose. SEBI further states that Copy of relevant/crystalized portion of the file noting was provided to ARCL during the inspection held on February 22, 2018.

SEBI’s stand on the same stands confirmed / clarified. 67. Out of 22 defaulter brokers of NSEL (buyers), name of the This information/documents leads to issue of defaulter brokers whose discrimination. performance 'audit/inspection of SEBI’s clarification is same as Sr. no. 20 above of this books of accounts have been table. ordered by SEBI (as per our letter dated October 05, 2017): 68. Volume of NSEL for the last 10 SEBI states that SCN does not refer to any such last 10 settlement cycles which was not settlement cycles. attributable to pair contract (as per our letter dated October 05, 2017). SEBI’s stand on the same stands confirmed / clarified. 69. Any evidence of ARCL offering During the hearing, ARCL did not contest / press for inducement to the client as discussion on this item in view of the inspection availed mentioned (as per our letter dated by ARCL on February 22, 2018. October 05, 2017). However, SEBI states that for the said item, copy of Auditor Reports and annexures to the reports including the PPT were already provided to ARCL. The same was Order in respect of Anand Rathi Commodities Limited

S. No. Documents/information sought Observations and Conclusion also informed to ARCL during the inspection held on February 22, 2018.

SEBI’s stand on the same stands confirmed / clarified. 70. Copies of any Bye- During the hearing, ARCL did not contest / press for Law/mandate/Rule/Regulation/Cir discussion on this item in view of the inspection availed cular prescribing that ARCL was to by ARCL on February 22, 2018. verify the authenticity of warehouse receipts and existence of However, SEBI states that copies of EOW Report, NSEL warehouse goods (as per our letter Complaints, Auditor Reports, annexures to the reports dated October 05, 2017). including the PPT, FMC Order and Annexure to FMC order and other relevant documents such as SGS Report, Grant Thornton Report were already provided to ARCL. The same was also informed to ARCL during the inspection held on February 22, 2018.

SEBI’s stand on the same stands confirmed / clarified. 71. Copies of any Bye During the hearing, ARCL did not contest / press for Law/mandate/Rule/Regulation/Cir discussion on this item in view of the inspection availed cular that prohibited NSEL brokers by ARCL on February 22, 2018. from allowing debits of clients in their books in the context of trading SEBI also states that copies of EOW Report, NSEL on NSEL platform (as per our letter Complaints, Auditor Reports, annexures to the reports dated October 05, 2017). including the PPT, FMC Order and Annexures to FMC order and other relevant documents such as SGS Report, Grant Thornton Report were already provided to ARCL. The same was also informed to ARCL during the inspection held on February 22, 2018.

SEBI’s stand on the same stands confirmed / clarified. 72. Copy of evidence/material on the' ARCL requested for the material to show that they had basis of which it is stated that ARCL communicated the PPT to clients. (by e-mail etc.). had given a PPT to the-investors (as per our letter dated October 05, SEBI states that for the said item, Auditor Reports, annexures to the reports including the PPT, FMC Order

Order in respect of Anand Rathi Commodities Limited

S. No. Documents/information sought Observations and Conclusion 2017). and Annexures to FMC order were already provided to ARCL.

SEBI’s stand on the same stands confirmed / clarified. 73. Copies of any Bye During the hearing, ARCL did not contest / press for Law/mandate/Rule/Regulation/Cir discussion on this item in view of the inspection availed cular of NSEL/FMC/SEBI or any by ARCL on February 22, 2018. other authority which required ARCL to carry out due diligence of SEBI reiterate that Enquiry Report is self-explanatory. the product in terms of risk The same was also informed to ARCL during the suitability of client in the context of inspection held on February 22, 2018. trading on NSEL platform (as per our letter dated October 05, 2017). SEBI’s stand on the same stands confirmed / clarified. 74. Copies of any – Bye During the hearing, ARCL did not contest / press for Law/mandate/Rule/Regulation/Cir discussion on this item in view of the inspection availed cular laying down the requirement by ARCL on February 22, 2018. for charging the margin from clients in the context of trading on SEBI reiterate that Enquiry Report is self-explanatory. NSEL platform (as per our letter The same was also informed to ARCL during the dated October 05, 2017). inspection held on February 22, 2018.

SEBI’s stand on the same stands confirmed / clarified. 75. Copies of any Bye During the hearing, ARCL did not contest / press for Law/mandate/Rule/Regulation/Cir discussion on this item in view of the inspection availed cular which prohibits NBFC under by ARCL on February 22, 2018. the same management as ARCL from financing the trades of clients SEBI reiterate that Enquiry Report is self-explanatory. of ARCL (as per our letter dated The same was also informed to ARCL during the October 05, 2017). inspection held on February 22, 2018.

SEBI’s stand on the same stands confirmed / clarified. 76. Minutes of SEBI Board Meeting This information/documents leads to issue of jurisdiction. dated February 11, 2017 SEBI’s clarification/explanation is same as Sr. no. 29 above of this table. ………”

Order in respect of Anand Rathi Commodities Limited

17. With respect to the issue of jurisdiction, on the basis of documents available on record, it is observed that since the Noticee has applied to SEBI, for the purpose of granting registration to the Noticee to act as a commodity broker, SEBI has jurisdiction, inter alia, to determine whether the Noticee is a fit and proper person to act as a commodity broker. Further, the existence or absence of jurisdiction is determined by statute as the statute can vest or oust the jurisdiction and any representations or statements made by any party are not material to the arguments on jurisdiction. Thus, I am of the view that the Noticee is not disadvantaged in any way without access to additional documents/information in this regard.

18. With respect to the issue of discrimination, I note that, the following observations of the Hon’ble Supreme Court in the context of argument of discrimination to claim negative equality in Union of India and anr. vs. International Trading Co. and anr. (AIR 2003 SC 3983) dated May 07, 2003, would be squarely applicable to the facts of this case.

“……two wrongs do not make one right. A party cannot claim that since something wrong has been done in another case directions should be given for doing another wrong. It would not be setting a wrong right, but would be perpetuating another wrong. In such matters there is no discrimination involved. The concept of equal treatment on the logic of Article 14 of the Constitution of India, 1950 (in short ‘the Constitution’) cannot be pressed into service in such cases. What the concept of equal treatment presupposes is existence of similar legal foothold. It does not countenance, repetition of a wrong action to bring both wrongs on a par. Even if hypothetically it is accepted that a wrong has been committed in some other case by introducing a concept of negative equality the respondents cannot strengthen their case. They have to establish the strength of their case on some other basis and not by claiming negative equality……”

19. While Hon’ble Supreme Court has clearly laid down the non-availability of the above ground of discrimination to establish the strength of one’s case, even otherwise, when an argument of discrimination is advanced on the ground of violation of Article 14 of the Constitution of India, the same is in effect challenging the decision taken by SEBI in its administrative capacity to launch action against the Noticee. I consider that this quasi-judicial forum is not the right forum to test the decision, already taken by SEBI in its administrative capacity on Order in respect of Anand Rathi Commodities Limited this ground. Needless to say, Noticee has other appropriate forum for judicial review of administrative action of SEBI on the ground of perceived discrimination.

20. Without prejudice to paragraphs 18 & 19 above, with respect to the issue of discrimination, on the basis of documents available on record, it is noted that the stand taken by SEBI in selection of the 5 brokers (including Noticee) for initiating proceedings against them is that the selection was on the basis of two documents i.e. EOW report and NSEL complaints; and admittedly copies of both documents have been provided to the Noticee. It is also noted that, at the moment, qua the NSEL matter, no proceedings have been initiated against any other brokers (other than the 5 brokers) or any investors; however, needless to say, SEBI has the power to initiate any proceedings as it deems fit, if warranted at any point of time as per law. Thus, I am of the view that given this unequivocal stand by SEBI, the Noticee has all the information it needs to make its representations qua the issue of discrimination and would not be disadvantaged in any way without access to additional documents/information in this regard.

21. It is noted that ARCL has availed the opportunity of inspection of documents on February 22, 2018. It is also noted that hearing on inspection was held on February 27, 2018. Thus, from the proceedings of inspection of documents dated February 22, 2018 and Table No. 1 mentioned above at paragraph 16, followings are noted:

(a) Copies of documents mentioned at Sr. No. 5, 6, 14, 39, 41, 43, 54, 62, 65 & 66 of Table no. 1 were provided to the Noticee at the time of inspection held on February 22, 2018. (b) The documents mentioned at Sr. No. 3, 17, 18, 20, 22 to 28, 31 to 34 and 67 of Table No. 1 leads to the issue of discrimination. The issue of discrimination is discussed at paragraph 20 above. (c) The documents mentioned at Sr. No. 29, 30, 63, 64 & 76 of Table No. 1 leads to the issue of jurisdiction. The issue of jurisdiction is discussed at paragraph 17 above. (d) The stand of SEBI in respect to the documents mentioned at Sr. No. 1, 2, 4, 7 to 13, 15, 16, 19, 21, 35 to 38, 40, 42, 44, 45, 47 to 53, 55 to 61 and 68 to 75 of Table No. 1 is confirmed.

Order in respect of Anand Rathi Commodities Limited (e) SEBI is directed to provide the documents referred at Sr. No. 46 of Table no. 1 to ARCL.

22. While discussing on the scope of right of fair hearing, in Kanwar Natwar Singh vs Directorate of Enforcement & Anr (MANU/SC/0795/2010), the Hon’ble Supreme court in its order dated October 05, 2010 reiterated that “…the right to fair hearing is a guaranteed right. Every person before an Authority exercising the adjudicatory powers has a right to know the evidence to be used against him. This principle is firmly established and recognized by this Court in Dhakeswari Cotton Mills Ltd. Vs. Commissioner of Income Tax, West Bengal [(1955) 1 SCR 941, MANU/SC/0073/1954]……”

23. The Hon’ble Supreme Court further held in its order dated October 05, 2010 passed in Kanwar Natwar Singh vs Directorate 0f Enforcement & Anr (MANU/SC/0795/2010) that “…even the principles of natural justice do not require supply of documents upon which no reliance has been placed by the Authority to set the law into motion. Supply of relied on documents based on which the law has been set into motion would meet the requirements of principles of natural justice”. “…Concept of fairness is not a one way street. The principles of natural justice are not intended to operate as roadblocks to obstruct statutory inquiries. Duty of adequate disclosure is only an additional procedural safeguard in order to ensure the attainment of the fairness and it has its own limitation.

24. I also note that Hon’ble Securities Appellate Tribunal (hereinafter referred to as “SAT”) made the observations of in the matter of Shri B. Ramalinga Raju v. SEBI (SAT order dated May 12, 2017, MANU/SB/0057/2017) …. “There can be no dispute that while determining the rights and obligations of the parties the quasi judicial authority must adhere to the principles of natural justice which inter alia, includes the obligation to furnish requisite documents on the basis of which charges are framed and permit cross-examination of the persons whose statements are relied upon ….”

25. I also note that the Noticee has placed reliance on the decision of the Hon’ble Supreme Court in case of SEBI v. Price Waterhouse (Civil Appeal No. 6003-6004 of 2012 decided on 10.01.2017). However, as regards the applicability of the said decision of Hon’ble Supreme Court to other cases in general, the following observations of Hon’ble SAT in the matter of Order in respect of Anand Rathi Commodities Limited

Shri B. Ramalinga Raju v. SEBI (SAT order dated May 12, 2017, MANU/SB/0057/2017) are noteworthy:

“… Apex Court in case of Price Waterhouse has specifically recorded that the directions given in that case are general directions given as and by way of clarifications without going into the merits of the case. Therefore, directions given in the facts of Price Waterhouse cannot be said to be the ratio laid down by the Apex Court applicable to all other cases. In these circumstances, appellants are not justified in contending that the directions given by the Apex Court in case of Price Waterhouse must be applied to the case of the appellants.”

Thus, the observations of Hon’ble Supreme Court in the matter of SEBI v. Price Waterhouse being case specific in nature, cannot be applied to the facts of the present case. In view of the above facts, circumstances and observations of Hon’ble SAT, I am not inclined to accede to the request of Noticee for grant of inspection of all the documents collected during examination as the relied upon documents have already been granted in consonance with the principles of natural justice.

26. Thus, upon consideration of the submissions of the Noticee, I note that Noticee has availed various opportunities of inspection of documents and has already obtained the copies of various documents from SEBI as outlined above and hence I am of the view that a fair opportunity to defend the case has thereby been granted to the Noticee by way of granting inspection of documents. However, it is noted that till date Noticee has not submitted any reply on merits of the allegations specified in the SCN relying on those documents of which they have already taken inspection.

27. I note that till now approximately 16 months have lapsed since the issuance of SCN and approximately 24 weeks have passed since the last inspection, the Noticee has neither submitted its reply on merit nor attended any hearing on merit. I am of the view that, if the Noticee does not submit its reply on merits in the matter within the time limit specified at paragraph 31 of this order or requests additional time to submit its reply on merits or if the Noticee does not appear on the date of hearing mentioned at paragraph 31 of this order or requests continuously for adjournment of hearing, then from now onwards such requests of time and adjournment can only be seen as dilatory tactics of the Noticee. Order in respect of Anand Rathi Commodities Limited

28. I note that the issue of jurisdiction and discrimination is discussed at paragraphs 17 and 20 above respectively. From paragraph 21, I note that at the time of inspection copies of documents mentioned at para 21(a) were provided to the Noticee. I also note that SEBI had confirmed its stand in respect of documents mentioned at para 21(b), 21(c) and 21(d). I am of the view that Noticee is not disadvantaged in any way without access to additional documents / information.

29. In summary, I am of the view that the Noticee has already been provided with all the relevant documents and clarifications which enable the Noticee to submit its defence in the present proceedings.

30. As a normal practice, the outcome on the issues of inspection is addressed by way of administrative notices/letters sent by SEBI. If formal orders are to be passed on every objection/issues raised by each Noticee in every proceeding, it will ultimately result in a multiplicity of orders in one and the same proceeding and further result in delay of dispensation of justice and also clog-up the quasi-judicial and appellate forum with unwarranted litigations. This will become a tool in the hands of entities who may not have substantive submissions to make on merit and seek to delay and wriggle out of rigors of timely enforcement action by raising such pleas with the intention of delaying final adjudication of the case on merits. SEBI has already passed an order on the aspect of outcome of inspection in a related matter Phillip Commodities India Pvt. Limited stating that the said order will not be cited as precedent. In the interest of uniformity to the related matter this order is passed. Thus, I am of the opinion that this order should not be cited as a precedent in every matter where inspection is sought by parties. This order is passed to clarify expressly this stand i.e. outcome on the issues of inspection shall be addressed/communicated by way of administrative notices/letters.

31. Thus, in the interest of conclusion of the proceedings initiated vide SCN dated April 24, 2017, I direct the Noticee to submit its reply on merit within a period of 3 weeks from the date of this order and to appear for a personal hearing on merits on September 27, 2018 at 10:30 A.M., Head Office, Mumbai. If the Noticee opts not to submit a reply on merits or appear for the personal hearing on merits on the scheduled date or do both, then, in the interest of justice and to avoid any further delay in bringing the present quasi-judicial

Order in respect of Anand Rathi Commodities Limited proceedings to its logical conclusion, the proceedings on merits shall proceed ex-parte on the basis of material available with SEBI.

32. A copy of this order may be served on the Noticee by e-mail/ speed-post/hand-delivery immediately.

-Sd- Date: AUGUST 30, 2018 MADHABI PURI BUCH Place: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA

Order in respect of Anand Rathi Commodities Limited