2012 (4) TMI 732 - AT - Companies Law

Summary

Issues involved:
- Violation of regulation 4 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (FUTP Regulation)
- Compliance with Rule 4(1) and 4(3) of Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995
- Delay in finalizing the proceedings
- Merits of the case regarding market manipulation

Violation of FUTP Regulation:
The appellant, a proprietor engaged in trading, was found guilty of market manipulation in the scrip of a company, involving a sharp increase in price and volume over a short period. The adjudicating officer imposed a penalty of 3 lacs under section 15HA of the Securities and Exchange Board of India Act, 1992.

Compliance with Rule 4(1) and 4(3):
The appellant raised an objection regarding the show cause notice combining Rule 4(1) and 4(3) requirements. The Tribunal found that the notice provided sufficient opportunity for defense, with multiple correspondences and hearings, thus complying with the rules.

Delay in Finalizing Proceedings:
Although the proceedings took several years, constant correspondence and hearings were conducted, ensuring no prejudice to the appellant. The delay did not impact the outcome of the case, thus not justifying a challenge.

Merits of the Case - Market Manipulation:
The appellant argued that the volume of manipulative transactions was negligible compared to total trades and had no market impact. However, the adjudicating officer presented evidence of synchronized/reversal trades with specific counterparties, creating artificial volumes to influence the market. The Tribunal upheld the penalty, considering the deliberate market manipulation.

Conclusion:
The Tribunal upheld the penalty imposed on the appellant for market manipulation, finding sufficient evidence to support the violation of FUTP Regulations. The delay in proceedings did not prejudice the appellant, and the compliance with procedural rules was deemed satisfactory. The appeal was dismissed, with no costs awarded.