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TMI Blog2013 (11) TMI 1425X X X X Extracts X X X X X X X X Extracts X X X X ..... In the present case, instead of furnishing entire copy of the investigation report, documents relied upon in the show cause notices have been furnished to the appellants. It is not the case of appellants that selective findings recorded in the investigation report are only furnished and findings which are in favour of the appellants have not been furnished and thereby prejudice is caused to the appellants. Similarly, contention that incomplete trade/order logs have been furnished to the appellants after granting personal hearing does not enhance the case of the appellants, because admittedly, appellants were called upon to furnish comments in respect thereof and appellants while offering their comments have neither demanded entire copy of the trade/order logs nor sought personal hearing in respect thereof - in the absence of any prejudice caused to the appellants by non supply of full investigation report or trade/order logs, it cannot be said principles of natural justice have been violated. Appellants are neither disputing the relationship between the parties set out in the impugned order, nor they are disputing the contents of the KYC documents. Their only grievance is KYC d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tigation conducted by the Respondent revealed that during the investigation period scrip of RCFL was interalia traded at Bombay Stock Exchange (BSE) for 138 days and that the price of the scrip at BSE opened at Rs. 8.90 on 27th March, 2009 and moved to a high of Rs. 80.15 on 12th August, 2009 and closed at Rs. 73.90 on 12th August, 2009 with average volume of 5,258 shares per day. 3. On completion of investigation show cause notices were issued to the appellants, calling upon them to show cause, as to why enquiry should not be held against appellants in terms of Rule 4 of the Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by the Adjudicating Officer) Rules, 1995 and penalty should not be imposed under section15HA of SEBI Act for the alleged contravention of the provisions of SEBI Act and PFUTP Regulations. In the show cause notices it was alleged that appellants contributed to new price high, entered into trades at higher price than last traded price of the scrip and also executed reversal/circular trades thereby creating artificial volumes in the scrip of RCFL and manipulated the price of that scrip which led to manipulative, fraudul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the impugned orders. Passing of impugned orders without furnishing the basis on which SEBI Board ordered investigation, failure to furnish complete investigation report and furnishing incomplete order logs after granting personal hearing to the appellants, are in violation of the principles of natural justice and hence the impugned orders are liable to be quashed and set aside. (b) Findings recorded in the impugned orders to the effect that the appellants were connected with each other and connected with the entities named therein, who traded in the shares of RCFL in connivance with each other are based on erroneous presumption and without any evidence on record. Fact that there are common Directors, common address etc between appellants, RCFL and the companies/individuals who have traded in the shares of RCFL during the investigation period cannot be a ground to hold that they are connected to each other as it is possible for two companies who are distinct legal entities to have common Directors and common address. Therefore, without any further evidence on record, inference drawn that the appellants were closely connected with RCFL, is wholly unjustified. (c) Witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ased on mere conjectures cannot be sustained. (f) Impugned orders purport to hold that appellants have effected circular/reversal trades which is contrary to facts on record. Appellants are jobbers and are day traders, wherein, they buy and sell shares on same day on several occasions in order to earn profit and in such a case there may be transactions with same party, who is also a jobber. Therefore, merely because some transactions were with the same jobber, it could not be inferred that there were circular/reversal trades. Consequently, findings recorded in the impugned orders that the Appellants have created artificial volumes in the scrip, thereby created artificial demand in the scrip and thus created false or misleading appearance of huge trading in the securities market relating to shares of RCFL is totally erroneous and wholly unjustified. (g) In the affidavit-in-reply to the show cause notices appellants had placed on record, trades in the scrip in question that the appellants had with other parties to demonstrate that all trades in question were carried out in the ordinary course of business as a simple investor/jobber. Adjudicating Officer failed to consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nish complete copy of the investigation report has caused prejudice to them. It is neither the case of appellants that documents relied upon in the show cause notice have not been furnished to them, nor it is the case of appellants that any particular document in possession of respondent which has bearing on the issues involved has been denied to the appellants, as a result of which prejudice has been caused to appellants. Therefore, unless there are compelling reasons, it would be just and proper that in every case the respondent furnishes entire copy of the investigation report to the charged person. In the present case, instead of furnishing entire copy of the investigation report, documents relied upon in the show cause notices have been furnished to the appellants. It is not the case of appellants that selective findings recorded in the investigation report are only furnished and findings which are in favour of the appellants have not been furnished and thereby prejudice is caused to the appellants. Similarly, contention that incomplete trade/order logs have been furnished to the appellants after granting personal hearing does not enhance the case of the appellants, because ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the KYC documents were made by appellants in their affidavit-in-reply to the show cause notices. No such request was made even during personal hearing. Therefore, in the absence of denial, findings regarding relationship of appellants with RCFL recorded in the impugned orders cannot be faulted. 16. Argument that appellants have not played any role in new price high/LTP variation is without any merit. Out of the price rise of Rs. 71.25 noticed during the investigation period, Ashesh Agarwal, Sanjeev Agarwal and Big Broker House Stock Ltd. (appellants herein) have contributed new price high of Rs. 1.95, Rs. 9.40 and Rs. 20.20 respectively. These facts are not in dispute. Similarly out of 584 instances of LTP variation, appellants executed trades at prices higher than LTP in 248 instances, thereby contributing a cumulative price rise of Rs. 139.97 or 44.60 percent (Page 44 of Appeal no.184 of 2012) out of which, Ashesh Agarwal contributed 43 instances with a price rise of Rs. 15.20, Sanjeev Agarwal contributed 61 instances with a price rise of Rs. 33.72 and Big Broker House Stock Ltd. contributed 139 instances with a price rise of Rs. 89.30. These facts are also not in dispute. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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