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TMI Blog2012 (11) TMI 1235X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992 (Brokers Regulations). The Board conducted investigation in the dealings in the scrip of M/s. Roofit Industries Limited (the company) for the period November 8, 2000 to February 6, 2001 and February 7, 2001 to May 8, 2001. The investigation revealed that certain entities that were connected among themselves and to the promoters/directors of the company traded in the shares of the company through a set of stock brokers by entering into structured/synchronized deals with each other. It was noticed that the appellant was one of the stock brokers in the network. The Board initiated proceedings against the appellant for violation of regulation 4 of the FUTP Regulations since the structured deals among the brokers was found to be manipulative in nature. An enquiry was conducted by the designated authority and a report was filed on June 30, 2009. One, Mr. Deven Mehta, director of one of the group companies, Amgis Holdings Pvt. Limited (Amgis), acted as a kingpin for the operations among the group companies and the brokers and the shares of the company were sold in spot transactions through synch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgued that the appellant, a broker, cannot be hauled up for structured deals when the corresponding clients have been exonerated. A reference is made to the order No. WTM/PS/37/IVD/ID-04/FEB/10 dated February 1, 2010 of the whole time member of the Board in the matter of Sunearth Ceramics Ltd. wherein identical facts and same enquiry report are considered. 4. Learned counsel appearing for the Board drew our attention to the order of this Tribunal in the case of Amgis Holdings Private Limited, [Appeal No. 114 of 2007 decided on 27.12.2010] and submitted that the facts of the present case are in pari materia with the facts in the above decision of the Tribunal and so the order of the whole time member does not call for any interference. It is an admitted fact that the shares got matched in the trades with Amgis. When the action taken against Amgis has been sustained, it should be held so in the case of the appellant too. According to the learned counsel for the Board, number of shares transacted, duration of trades, relationship of the parties and the circulation of the shares within the group remain undisputed. The scrip in question is illiquid and Deven Mehta and the companies in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iously he is party to the mischief. Since the trading system maintains complete anonymity, brokers, as in the present case, plead that they were ignorant about the counter party or his broker at the time of executing the trade. In such a situation one has to look to the trading pattern and if the trades match too often or if the matching of the trades is noticed day after day and trade after trade, one can infer that the matching was done not by the system but by manipulating the same. In the absence of prior meeting of minds and knowing the mechanism of the trading system, matching trades as aforesaid cannot be too frequent an occurrence and can lead to only one conclusion that the trades had been manipulated by misusing the system. Normally, no direct evidence would be available to find out whether a broker was aware of the matching trades. The intention of the parties and the brokers will have to be gathered from the surrounding circumstances looking at the trading pattern, the frequency of trades and other related circumstances. ... It is not in dispute that the aforesaid five clients of the appellant were in need of funds and they were introduced by the appellant to counte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143 of 2011 decided on November 28, 2011]. 10. The learned counsel for the respondent Board defended the order of the whole time member observing that the appellant took considerable time to file replies to the show cause notice. 11. We have considered the contentions of the parties. Admittedly, there is no convincing explanation for the delay in finalization of proceedings in the present case. Even if the period covered in the conclusion of consent proceedings is given due consideration, the finalization has taken a considerably long period of time which has caused prejudice to the appellant in the form of uncertainty. It remains to be explained why the enquiry proceedings relating to transactions which took place in 2001 were commenced only in 2005. Moreover, the completion of enquiry proceedings and submission of report thereon dragged on till 2009. It is an admitted fact that delay denies justice. If a person has committed a wrong and it has an impact on the securities market immediate action is called for to prevent the involvement of the said person in the market. A mere suspension of the certificate of registration in 2012 for a wrong doing committed in 2001 may not set a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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