9911796707
TMI Blog2008 (2) TMI 935X X X X Extracts X X X X X X X X Extracts X X X X ..... 92 (for short the Act ). Facts giving rise to this appeal are these. 2. On receipt of some reports from the Bombay Stock Exchange (BSE) the Securities and Exchange Board of India (for short the Board ) ordered investigations into the alleged irregularities in the trading in the scrip of Malvica Engineering Ltd. (hereinafter called the company ). The investigations were carried out for two periods from 20-12-1999 to 31-3-2000 and again from 7-8-2000 to 31-8-2000. During the course of the investigations it transpired that the company had forfeited more than 37 lakh shares held by the public on account of non-payment of call money and that more than 35 lakhs of these shares were allotted in December 1999 to a large number of allottees in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Sub-brokers) Regulations, 1992 (for short the Broker Regulations ) and Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003. The details of the contravention alleged were contained in Annexure A to the show-cause notice. We have carefully gone through this Annexure and find that the gravamen of the charge levelled against the appellant is contained in para 9 thereof which reads as under : Both M/s. Mayekar Investments Pvt. Ltd. and M/s. K.P. Investments are entities related to Mr. Pankaj A. Desai and these two entities matched trades and created artificial volumes in the market. It was alleged that the gross purchases made by the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to be matching trades executed between Mayekar and KP were executed through the firm as a sub-broker of the appellant. It is by now well-settled that a sub-broker is an agent of the broker. In other words, the firm was the agent of the appellant and since it had executed the trades in question on behalf of the appellant, the latter could be held responsible for the acts of the firm provided that it was alleged and established that the firm as a sub-broker had done something wrong. We have gone through the show-cause notice as well as the impugned order and find that it is nowhere alleged that the firm as the sub-broker had done anything wrong for which the appellant as the principal could be held responsible. It is clear from para 9 of A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rong for which the appellant could be held responsible. We asked the learned counsel for the respondent as to whether any such finding had been recorded and he could only refer to paragraph 4.4 of the impugned order. We have gone through this para-graph and find that no such finding has been recorded. What is stated therein is that a broker cannot avoid action and preclude the Board from taking any action against him by stating that the trades were done by his sub-broker as long as it is established that all the dubious trades in question were executed through the broker. This is a general statement and does not point to any wrong doing on behalf of the firm as a sub-broker nor does it establish that the appellant as a broker had failed i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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