Rajeev Praful Shah vs Sebi

Date of Decision: 14.02.2023

Misc. Application No. 154 of 2023 And Appeal No. 197 of 2023

Parag Praful Shah Flat No. 83, 8th Floor, Jolly Maker Apartment No. 2, Cuffe Parade, Colaba, Mumbai- 400 005 ...Appellant

Versus

National Stock Exchange of India Limited Exchange Plaza, C-1, Block G, Bandra-Kurla Complex, Bandra (E), Mumbai- 400 051 ...Respondent

WITH Misc. Application No. 155 of 2023 And Appeal No. 198 of 2023

Rajeev Praful Shah 61B Sea Lord, Cuffe Parade, Near Taj President Hotel, Colaba, Mumbai- 400 005 ...Appellant

Versus

National Stock Exchange of India Limited Exchange Plaza, C-1, Block G, Bandra-Kurla Complex, Bandra (E), Mumbai- 400 051 ...Respondent 2

Mr. Zubin Sheth, Advocate i/b Y & A Legal, Advocates for Appellants.

Mr. Pradeep Sancheti, Senior Advocate with Mr. Rashid Boatwalla and Ms. Samiksha Rajput, Advocates i/b MKA & Co. for the Respondent.

CORAM: Justice Tarun Agarwala, Presiding Officer Ms. Meera Swarup, Technical Member

Per: Justice Tarun Agarwala, Presiding Officer (Oral)

1.

Two separate appeals have been filed against two separate

orders passed by the Member and Core Settlement Guarantee

Fund Committee ("Committee" for convenience) of the

National Stock Exchange of India Limited rejecting the claim of

the appellants for compensation under the Investor Protection

Fund has been rejected. Since the issue is common, both the

appeals are being heard and decided together.

2. For facility the facts stated in the appeal of Parag Praful

Shah is being taken into consideration.

3. The appellant opened a demat trading account with

Anugrah Stock and Broking Private Limited ("Anugrah" for

convenience) who is a trading member on August 27, 2019 and 3

deposited margin monies amounting to Rs. 5,00,000/- (Rupees

Five Lakhs Only) and shares having a total value of

Rs. 14,05,000/- (Rupees Fourteen Lakhs and Five Thousand

Only). The Stock Exchange by an order of November 26, 2020

declared Anugrah as a defaulter trading member under Chapter

XII of the Bye-laws of the Exchange and expelled it under Rule

1 and 2 of Chapter IV of the Bye-laws of the Exchange. The

appellant filed a claim on February 24, 2021 with the

Defaulters' Section of the Exchange for payment of an amount

of Rs. 19,97,575/- from the Investor Protection Fund. This

claim was found to be inadmissible and, accordingly, the claim

was rejected by an order of May 24, 2021. Subsequently, a

review application was filed which was rejected by an order of

July 05, 2021. The claimant/ appellant filed an Appeal No. 418

of 2022 before this Tribunal which was allowed and the order

was set aside and the matter was remanded to the Committee to

pass a fresh order giving reasons. Based on the directions of

this Tribunal the impugned order has been passed again

rejecting the claim of the appellants.

4. We have heard Shri Zubin Sheth, the learned counsel for

the appellants and Shri Pradeep Sancheti, the learned senior

counsel for the respondent.

4

5. We find that the claimant/ appellant Parag Praful Shah

received the following amounts from the broker, namely,

25-Nov-19 13,533.00 23-Dec-19 13,708.00 29-Jan-20 13,904.00 28-Feb-20 13,500.00

6. On a query raised by us the learned counsel contended that

these amounts were received from the broker through the trades

carried out by the appellants. What trades were carried out was

not known nor any evidence in the form of contract notes, etc.

was placed before us.

7. In the light of the aforesaid, we are of the view that the

amount so received from the broker indicates that a constant

amount of Rs. 13,000/- odd was given to the appellant every

month which is purported towards guaranteed returns or assured

returns.

8. In this regard, the Committee found that a Forensic Audit

was conducted which revealed that the broker Anugrah was

offering Derivative Advisory Services to its clients assuring

fixed returns and was potentially carrying out the same in the

nature of Portfolio Monitoring Services offering two plans, 5

namely, Gold and Platinum, wherein the clients were being

offered assured return of 12% p.a. The Audit further revealed a

list of clients who were availing the Derivative Advisory

Services.

9. In the absence of any proof that the payouts received by

the client from the broker were through trades carried out by the

appellant on the platform of the Stock Exchange, we are of the

view that the Committee was justified in holding that the

payouts received by the appellant was in the nature of fixed

assured returns and, therefore, the claim was ineligible under the

Bye-laws of the Stock Exchange.

10. In view of the aforesaid, we do not find any error in the

impugned orders. Both the appeals fail and are dismissed with

no order as to costs. Misc. applications are disposed of

accordingly.

11. This order will be digitally signed by the Private

Secretary on behalf of the bench and all concerned parties are

directed to act on the digitally signed copy of this order. 6

Certified copy of this order is also available from the Registry

on payment of usual charges.

Justice Tarun Agarwala Presiding Officer

Ms. Meera Swarup Technical Member 14.02.2023 PRERNA Digitally by PRERNA signed

PK MANISH Date: 2023.02.15 MANISH KHARE

KHARE 15:49:03 +05'30'