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TMI Blog2019 (12) TMI 1142X X X X Extracts X X X X X X X X Extracts X X X X ..... nience), Futures and Options ("F&O" for convenience) and Currency Derivatives Segments ("CD" for convenience). The NSE conducted a regular inspection of the books and other relevant records of the appellant in April 2012 covering the period from August 01, 2011 to February 27, 2012. The said inspection also covered issues relating to certain investor complaints. During the said inspection several violations of various regulations, rules and bye laws of Securities and Exchange Board of India ("SEBI" for convenience), NSE as well as the National Securities Clearing Corporation Limited ("NSCCL" for convenience) were noticed and a show cause notice dated May 02, 2012 was issued to the appellant directing the appellant to provide its explanation as well as to show cause as to why disciplinary action should not be initiated against the appellant. Further, the appellant has been disabled by NSE in the CD segment w.e.f. May 04, 2012 due to margin violation, from F&O segment w.e.f. August 06, 2012 due to shortages of security deposits and from the CM segment w.e.f. August 21, 2012 due to shortages in security deposits. 3. Apart from procedural violations, the charges against the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rokerage amount to the respective clients has also been ordered. Advice/Warning was issued for non-maintenance of clients ledgers properly, abstain from levying late pay-in charges in excess of rates agreed upon by the clients, to put in place necessary checks and balances to ensure investor safety and maintenance of up to date financial records and other procedural steps. 4. Learned counsel Shri Piyush Raheja appearing on behalf of the appellant submits that the appellant received its registration certificate from SEBI and NSE in the year 2000 and for 10 years no violations have been made or noticed by either NSE or SEBI. Therefore, it is the first time that certain inadvertent omission might have happened. It is also appellants' stand that the NSE carried out the inspection and issued a large number of communications, including Email, Telephone calls etc. seeking documents and responses in a very short time and that too at odd hours. Further, it is contended that the inspection team carried out their inspection in a spiteful manner. Despite such arbitrary behavior of the NSE the appellant co-operated in the said inspection. However, despite the explanation given by the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. In any case, the alleged margin shortfall is devoid of merit as it was already informed to the NSE that there was sufficient margin available in the account of the shareholders of the appellant which is a closely held company. 5. Similarly, the appellant refutes the charge of the DAC that the appellant did not do actual settlement of funds and securities of the clients periodically as well as on their request by citing mistakes on the part of the NSE inspection team or incorrect interpretation of the Circulars by the DAC. 6. Regarding the charge that the appellant collected excess brokerage also a similar stand has been taken by the appellant i.e. the NSE inspection team being wrong or the interpretation of the Circulars and bye laws is not correct. As a case in point the appellants contends that regulation 3.7 of F&O segment prohibits brokerage exceeding the scale prescribed therein and only when the scale is exceeded can it be called excess. The appellant has never exceeded the given scale. Scale of 2.5% of the contract value in F&O segment of Rs. 100/- per lot in case of options contract. Further it was submitted that in any case the alleged excess brokerage collected is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n category (a) where percentage of factual wrong reporting of margin collection from constituents and in (b) percentage of margins not properly accounted for (where excess margin available with member in the accounts of relatives, with authorizations). The appellant is taking shelter under (b) while the respondent has issued the order under (a). Although the DAC has found some deficiencies in the claim of the appellant that his relatives had excess margin in their accounts the issue is not conclusively settled. Accordingly, appellant deserves benefit of doubt. Moreover, it is an established principle in law that when there are two provisions in law the more beneficial provision should be applied wherever appropriate. This is particularly relevant in the context of the appellant who has been indefinitely suspended also for the various violations impugned in this appeal. Therefore, we reduce the amount of penalty imposed on wrong reporting from Rs. 15 lakhs to Rs. 1 lakh on the ground of proportionality. 11. Regarding the penalty imposed on other violations we do not agree with the submissions of the appellant. As the documents clearly show that such violations have been committed, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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