Pumarth Commodities Pvt. Ltd. vs Sebi

Order Reserved on: 18.09.2019

Date of Decision : 07.11.2019

Appeal No. 79 of 2019

Pumarth Commodities Pvt. Ltd. 5/5-A, Navratan Bagh, Off. Geeta Bhawan Square, Behind Vishesh Hospital, Indore - 452 001 (M.P.) ..... Appellant

Versus

National Commodity & Derivatives Exchange Ltd. Akruti Corporate Park, 1st Floor, Near G.E. Garden, L.B.S. Marg, ....Respondent Kanjur Marg (West), Mumbai - 400 078.

Mr. Rajesh Khandelwal, Advocate i/b Juris Link for the Appellant.

Mr. Mittu Choudhary, Advocate i/b Regstreet Law Advisors for the Respondent.

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

Per : Justice M.T. Joshi, Judicial Member 2

1.

Aggrieved by the order of the respondent imposing

penalty aggregating to Rs. 25,53,000/- on three separate

counts dated September 21, 2018 as confirmed in the review

vide order dated December 14, 2018 the present appeal is

preferred.

2. The record would show that the respondent has carried

out the inspection of the appellant trader for a period April 1,

2014 to September 28, 2016. Inter alia, it was found that the

appellant has wrongly reported margin provided by their

client, particularly, on 26th and 28th October, 2015 for which a

penalty of Rs. 25 lakh was imposed. Secondly, it was found

that the appellant has used the client's bank account for the

purpose other than specified by the exchange for its own

purpose. Therefore, a penalty of Rs. 50,000/- was imposed.

Lastly, for mis-declaration given in annual compliance report

after the inspection, a penalty of Rs. 3,000/- was imposed.

3. The submissions from both the sides would show that

the appellant made wrong reporting of margin of

Rs. 1,69,71,959/- for the trading on the above referred two

dates. The appellant explained that as there was huge

volatility in Dhaniya (coriander) contracts on October 26 and 3

27, 2015 there was a short fall. The clients however had

stocks held in the sister concern of the appellant. In the

circumstances, though cheques were issued by the respective

clients, at their request the cheques were not encashed and

later on the accounts were squared off. The appellant by

giving this explanation had admitted that there was a short

fall.

4. The learned counsel for the appellant submitted before

us that due to the volatility in the market only for two days

there was a margin short fall and therefore wrong reporting of

the margin in 22 cases had occurred. He submitted that since

sufficient margin of the same client was available with the

sister concern in the form of security, wrong reporting of

margin money was merely a technical error. He, therefore,

submitted that a lesser penalty would have been appropriate.

As regards the penalties on two other counts, the learned

counsel for the appellant did not raise any issue.

5. Upon hearing both the sides, in our view the order of the

respondent needs no interference. It is to be noted that a huge

short fall in margin was wrongly reported by the appellant. In

the circumstances, 100% penalty could have been imposed

according to the relevant circulars of Securities and Exchange 4

Board of India ('SEBI' for short). The explanation that the

clients had requested for not encashing the cheques as they

have provided securities to sister concern cannot be accepted.

The market integrity is required to be maintained at all costs.

6. In the circumstances, the following order:-

(a) The appeal is hereby dismissed with no order as to

costs.

Sd/-

Justice Tarun Agarwala Presiding Officer

Sd/-

Dr. C.K.G. Nair Member

Sd/-

Justice M.T. Joshi Judicial Member 07.11.2019 Prepared and compared by:msb