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Issues Involved:
1. Validity of the Show Cause Notice 2. Allegations of Artificial and Misleading Trading 3. Allegations of Acting as an Unregistered Broker 4. Examination of Evidence and Statements 5. Adherence to Principles of Natural Justice Summary: 1. Validity of the Show Cause Notice: The Tribunal noted that the show cause notice did not disclose any cause of action or specific violations by the appellant. It was observed that the notice failed to make clear how the appellant violated Regulation 4(b) of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995. 2. Allegations of Artificial and Misleading Trading: The appellant was accused of creating an artificial and misleading appearance of trading in the scrip of Shonkh Technologies International Ltd. (STIL) and artificially raising its price. However, the Tribunal found that the appellant executed only three minor trades (sell orders) on three different days, which were not capable of affecting the price. The Tribunal concluded that the charge of manipulation could not be established. 3. Allegations of Acting as an Unregistered Broker: The show cause notice alleged that the appellant acted as a sub-broker without registration, violating Rule 3 of the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Rules, 1992. The appellant denied this, stating that it had purchased shares from entities named in the notice and sold them, thus not acting as a sub-broker. The Tribunal noted that there was no finding in the impugned order regarding this charge, implying that the explanation provided by the appellant was accepted. 4. Examination of Evidence and Statements: The Tribunal examined statements from Mr. Pawan Gupta and Mr. S.K. Gupta. Mr. S.K. Gupta had initially stated that trades were executed by Mr. Pawan Gupta in his name but later retracted this statement. The Tribunal found the retracted statement unreliable and noted that the whole-time member did not record any findings based on it. Therefore, the Tribunal did not rely on this testimony to hold the appellant responsible for manipulating the price of the scrip. 5. Adherence to Principles of Natural Justice: The Tribunal emphasized the importance of adhering to principles of natural justice, citing the Supreme Court's observations in Canara Bank v. Debasis Das. It highlighted that the show cause notice must be precise and unambiguous, providing the party with a clear understanding of the case to be met. The Tribunal found that the notice in this case did not meet these standards, rendering the impugned order unsustainable. Conclusion: The appeal was allowed, and the impugned order was set aside with no order as to costs.
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