SHAILESH M. VED Vs. ADJUDICATING OFFICER SECURITIES AND

JUDGEMENT

(1.) THIS order will dispose of two Appeals no.63 and 71 of 2011 which involve identical questions of law and fact. Since arguments have been addressed in Appeal no.63 of 2011, the facts are being taken from this case.

(2.) THE appellant before us is an investor in the securities market and he has been trading in different scrips including the scrip of Nandan Exim Ltd. (hereinafter called the company). He is a director in Krishna Capshares (P) Ltd. which is the appellant in the other appeal. The shares of the company are listed on the National Stock Exchange of India Ltd., Bombay Stock Exchange Limited and Ahmedabad Stock Exchange. The Securities and Exchange Board of India (for short the Board) investigated the trading in the scrip of the company for the period from June 13, 2005 to September 30, 2005 and again for the period from September 20, 2006 to November 23, 2006. We are concerned with the subsequent period during which the appellant is said to have executed trades in the scrip of the company. On the conclusion of the investigations, the appellant was charged with two violations. The first violation was in regard to Regulations 3 and 4 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003. It was alleged that he placed buy orders in the scrip of the company at a price lower than the last traded price and was deleting such orders after some time. Investigations had also revealed that he was placing big buy orders and was later updating them with minor changes or without any change. By following this practice, it was observed that his orders were going in queue and the orders remained unexecuted and after some time those were being deleted. In short, the appellant is said to have been putting huge buy orders away from the market price revealing the entire quantity on the trading screen and subsequently updating and deleting the orders and, thus, created artificial buying pressure in the market and manipulated the order book. This according to the Board violated Regulations 3 and 4 of the Regulations. The second charge levelled against the appellant is that he failed to provide crucial information/documents during the course of the investigations whereby he prevented the Board from effectively gathering vital evidence. The appellant was summoned by the investigating authority to provide certain information/documents and was also required to appear in person with the requisite information. According to the Board, he repeatedly failed to comply with the summonses and, therefore, violated section 11C of the Securities and Exchange Board of India Act, 1992 (for short the Act). A show cause notice was issued to the appellant with the aforesaid two charges to which he filed his reply denying both of them. On a consideration of the material collected during the course of the investigations and the enquiry conducted by the adjudicating officer, she found that both the charges stood established and by her order dated December 30, 2010 she imposed a monetary penalty of Rs. 15 lacs on the appellant. Rs.5 lacs was the penalty for not complying with the provisions of section 11 C of the Act and a sum of Rs.10 lacs for violating Regulations 3 and 4 of the Regulations. It is against this order that the appellant has filed the present appeal.

(3.) WE have heard the learned counsel for the parties who have taken us through the record and the impugned order. We shall first deal with the charge relating to the violation of Regulations 3 and 4 of the Regulations. The details of the trades and orders placed by the appellant in the scrip of the company are as under: - Date Buy Order Qty Buy Trade Qty Diff Sell Order Qty Sell Trade Qty Diff Buy trade Value SaleTrade Value 17/10/06 7,417,463 1,809,365 5,608,098 2354266 1,809,365 544,901 31574910.48 32,167,219.97 18/10/06 3,265,732 360,000 2,905,732 670784 341,640 329,144 6283122.92 5,854,722.48 19/10/06 18360 18,360 0 314,958.37 27/10/06 5,070,978 1,162,114 3,908,864 2011666 1,162,114 849,552 18758583.33 18,744,488.87 30/10/06 11,198,101 2,452,561 8,745,540 2728794 2,452,561 276,233 37150632.05 37,291,428.38 31/10/06 14,010,274 1,546,474 12,463,800 2042164 1,546,474 495,690 24005391.67 23,987,137.22 1/11/06 7,103,787 1,696,577 5,407,210 2004151 1,696,577 307,577 25498139.35 26,348,557.15 2/11/06 15,887,249 1,205,245 14,682,004 1496144 1,205,245 290,899 17672383.95 17,709,529.50 3/11/06