Securities Appellate Tribunal, Mumbai

Ritedeal Trading Co. (P) Ltd.

v.

SEBI

JUSTICE N.K. SODHI, PRESIDING OFFICER

ARUN BHARGAVA AND UTPAL BHATTACHARYA, MEMBER

APPEAL NO. 158 OF 2007

October 26, 2007

Section 15HB, read with section 11 of the Securities and Exchange Board of India Act, 1992 - Penalties and adjudication - Penalty for contravention where no separate penalty has been provided - Respondent - Board by an exparte / interim order restrained several entities including appellant not to buy, sell or deal in securities of one ‘M’ Ltd - However, when ex-parte restraint order was in operation, certain shares of ‘M’ Ltd. held by appellant - Company were admittedly sold - Accordingly, penalty was imposed on appellants - On instant appeal, appellants contended that shares in question were lying with broker in its pool account and those were sold by mistake by punching operator who was operating terminal - Whether since director of appellant company did not appear before Ajudicating Officer despite receipt of notices and at no stage prior to filing of appeal did he ever dispute that he was not responsible for placing sell order on behalf of company, in such circumstances contention sought to be raised in instant appeal was only an after thought which could not be accepted - Held, yes - Whether, therefore, instant appeal was to be dismissed - Held, yes

FACTS

The respondent - Board passed by an exparte interim order wherein several entities including, the appellants had been directed not to buy or sell or deal in the securities of one Ltd ‘M’ directly or indirectly till further directions. The appellants admittedly sold certain shares of ‘M’ Ltd. as held by them, when the ex-parte restraint order was in operation. Accordingly, a penalty was imposed on the appellants, on instant appeal, the appellants contended that the shares in question were lying with the broker in its pool account and those were sold by mistake by the punching operator who was operating the terminal.

HELD

The directors of the appellant - company must be presumed to have knowledge of the sell order placed by the company. That apart, the director did not appear before the adjudication officer despite receipt of notices and at no stage prior to the filing of the instant appeal did he ever dispute that he was not responsible for placing the order on behalf of the company. In this view of the matter the contention now raised was only an after thought and the same could not be accepted. [Para 3]

As regards the contention of the appellants that the penalty imposed by the adjudicating officer, was unduly harsh, the market players cannot be heard to say that the penalty is harsh when they violate knowingly the orders of the statutory regulator. If market players are allowed to flout with impunity the orders of the regulator it would be difficult for the letter to carry out its statutory duties.

In the result, the appeals failed and stood dismissed. [Para 4]