Nirmal Bang

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These four appeals are directed against the Nirmal bang online trading login composite order pertaining to the Appellants passed on According to the Respondent SEBI "the index movements of stock exchanges showed excessive volatility especially during mid February to mid March, ".

In the context of "apprehensions of possible attempts by certain entities to distort the true market discovery and manipulate the securities market" SEBI carried out a preliminary investigation to find out the role of various entities including the Appellants. According to SEBI these preliminary investigations revealed that the Appellants had indulged in large trading transactions in the scrips of some companies stated in the impugned order and "these transactions prima facie appeared, inter alia, to have been carried out to artificially depress the prices" of the scrips of the said companies.

In that context on A post decisional hearing was given to the Appellants on On the same day an Enquiry Officer was appointed. The Enquiry Officer issued a show cause notice to the Appellant on He also issued a second show cause nirmal bang online trading login to them on The Enquiry Officer submitted his report on The Enquiry Officer in his report observed inter alia that:.

Indulging in large trading transactions in the selective scrips with a view to depress artificially the prices of these securities between mid February and mid March in a concerted manner with BEB.

Indulging in short sales after 8. Indulging in large trading transactions in the selective scrips with a view to depress artificially the prices of these securities between mid February and mid March in a concerted manner. Two lakh shares of Global Tele were sold when share prices registered substantial fall.

Indulging in synchronised trades with First Global Stock Brokers FGSB in which the price, quantity etc were matched and which in turn is a manipulative practice. The trading by Bama on 23rd February, 1st March, 2nd March are very high and manipulative. When share prices registered substantial fall - there were 11 sales in time slots which were considered significant. The Respondent, in the light of the nirmal bang online trading login of the Enquiry Officer issued a show cause notice to the Appellants on They responded to the same by filing replies.

They made oral submissions and filed written submissions also. The Respondent adjudicated matter and came to the conclusion that the Appellants "have indulged in large trading transactions with a view to depress the nirmal bang online trading login artificially in a concerted manner, indulged in short sales, synchronised trading, trading in particular time slots when the share prices registered substantial fall, routing of large transactions through unregistered sub brokers".

Shri Janak Dwarkadas, learned Senior Counsel appearing for the Appellants referred to the profile of the Appellants in each of the appeals. He submitted that the Appellants in appeal no. Appellant in appeal no. There are over sub brokers registered under these entities - 56 sub brokers of NBS20 of BEB and 35 of Bama providing service to over retail investors across the country.

According to the Appellants during the yeartheir annual traded turnover was to the tune of Rs. Learned Senior Counsel submitted that the Appellants merely act as brokers for their various clients and transact in securities on their behalf without giving them any advice as to what securities to buy or sell, that they simply execute the orders for the sale or purchase of securities placed with them by their clients without influencing or contributing to the investment decisions of their client in any manner.

For executing the orders of the clients as the clients' agents, the Appellants can not be held to have indulged in price manipulation, that the Respondent has not made any attempt to find out whether the alleged transactions were all proprietary transactions or transacting for the clients. Shri Dwarkadas submitted that according to the Respondent's theory Bulls are good and Bears are bad.

He submitted that a market cannot operate without a buyer and a seller, that it is not proper to condemn those who sell the shares.

Learned Senior Counsel submitted that SEBI has provided several built in safeguards to regulate the market and it is for SEBI to show how these safeguards were not observed, that carrying on transactions without flouting any of the regulations and by adhering to the safeguards cannot be viewed as a violation of SEBI requirements in position.

Learned Senior Counsel referred to the list of dates and events furnished in the written submission of the Appellants and submitted that in there was an unprecedented boom in the information technology communication and entertainment stock ICE Stocks all over the world, that this resulted in buoyancy in the price of ICE stocks, that the prices of these stocks rose inter alia on NASDAQ as well as on the Stock Exchanges in India, that during this period the prices of these ICE stocks touched all time higher figures.

He submitted that share of companies whose prices, the Appellants are accused of artificially depressing, had also risen as part of the unprecedented boom in prices during the period. He submitted that on The share prices reacted to the market sentiment and rose, including the relevant shares referred to in SEBI's order, but SEBI has not charged any person nirmal bang online trading login the context of Sensex going by points.

But Sensex fell by points on 2. According to the learned Senior Nirmal bang online trading login this fall was due to sell off by foreign funds in Technology, Media and Telecom Stocks and profit warning by Oracle, the world's second largest software company as reported in the media, that the Respondent took note of the said fall and commenced investigation to ascertain the reasons for the fall in the market, though it did not consider to carry out any investigation on the sudden spurt of Sensex by points on He submitted that SEBI conducted itself in such a manner, as if it is mandated to carry out investigations etc.

Learned Senior Counsel stated that on Nirmal bang online trading login submitted that the Respondent has ignored the circumstances leading to the fall in price of scrips, which was a general phenomenon, and decided to charge the Appellants responsible for depressing the market without any justification. Learned Senior Counsel having stated the scenario as aforesaid made the following submissions.

The impugned nirmal bang online trading login has been passed in violation of Regulation 29 3 of the Stock Brokers Regulations, that Regulation 29 3 requires SEBI to pass the requisite orders within 30 days of the receipt of the reply to the show cause notice from the noticee.

He submitted that the requirements under Regulation 29 3 are mandatory and no relaxation is available. Even where a personal hearing has been sought, it is incumbent on SEBI to conclude such process and make the Order within the aforesaid period of 30 days.

He stated that the show cause notice dated 30th May, was issued to all the Appellants including Nirmal bang online trading login. Bama replied to the aforesaid notice vide its letter dated 12th June, Bama did not seek any personal hearing in the matter. Consequently, as far as Bama is concerned, the nirmal bang online trading login in the show cause notice was required to be passed not later than 11th July, in view of the said Regulation 29 3.

The impugned order is however dated 30th July, Therefore, as far as Bama is concerned the impugned order has been passed in violation of the said Regulation 29 3.

The provisions of Regulation 29 3 being mandatory the failure to comply with the same will vitiate any order passed in violation thereof. In view of the aforesaid, the impugned order is vitiated at least qua Bama. In the impugned order, the Respondent has come to the conclusion that all the Appellants were acting in concert to artificially depress the price in certain scrips.

In this regard, the findings against the Appellants are therefore not nirmal bang online trading login. SEBI, passed a common order against all the Appellants in spite of the requests of the Appellants to treat them all individually and separately and to pass separate orders in respect of each of them. By clubbing all the Appellants together and rendering a finding in the impugned order that all the Appellants acted in nirmal bang online trading login to artificially depress the price in the scrip, the impugned order has become inseverable.

Consequently, if the impugned order is vitiated qua Bama on account of a violation of the said Regulation 29 3the impugned order can not survive qua the other three Appellants and must be set aside in toto. In support of the submission this Tribunal's decision in Atul Kanodia Nirmal bang online trading login. SEBI is not empowered to cancel the registration of the Appellants on the basis of the findings rendered in the nirmal bang online trading login order.

SEBI is not empowered or entitled to cancel the registration of the Appellants on the grounds of violation of the aforesaid Regulations. In the instant case, the Appellants have not been charged with or found guilty of any of the aforesaid.

Provided that no such certificate shall be suspended or cancelled unless the procedure specified in the Regulation applicable to such intermediary nirmal bang online trading login complied with.

Consequently, the proviso to Regulation 13 must be read harmoniously with the provisions of the said Regulation Regulation 26 2 provides for the penalty of cancellation of registration. Hence it is clear that though market manipulation and fraud are both covered by the FUTP Regulations, different penalties are prescribed for market manipulation and fraud by Regulation 26 of the Stock Broker Regulations.

Though market manipulation and fraud are both covered by the FUTP Regulations, market manipulation entails suspension of registration, nirmal bang online trading login entails cancellation of registration. The charge of fraud, being more serious than that of market manipulation, therefore entails cancellation of registration while market manipulation entails suspension of registration.

This would be covered by Regulation 26 1 i v of the Stock Broker Regulations nirmal bang online trading login not by Regulation 26 2. Nirmal bang online trading login, there was no question of canceling the registration of the Appellants and the impugned order is therefore clearly ultra vires and without authority. An intermediary would include merchant bankers, portfolio managers, mutual funds, venture capitalists, registrars to an issue, share transfer agents, under-writers, foreign institutional investors, etc.

An examination of the different Regulations in respect of the different intermediaries will show that the Legislature has consciously provided for specific situations in which nirmal bang online trading login registration of a particular intermediary may be cancelled or suspended. These provisions are intermediary-specific and offence-specific. An analysis of the provisions of Regulations 25 and 26 will show that Regulation 25 is a general provision conferring upon SEBI the general power to impose the penalty of suspension or cancellation of registration, Regulation 26 prescribes the situations, conditions under which the penalty of suspension or cancellation of registration may be imposed.

In other words Regulation 26 contains the guidelines to be followed by SEBI while imposing a penalty of suspension or cancellation of registration and such penalties imposed by SEBI is strictly in accordance with the provisions of Regulation This is further born out by the fact that Regulation 26 covers all the situations listed in Regulation 25 1.

This is the nirmal bang online trading login harmonious nirmal bang online trading login that can be placed on Regulations 25 nirmal bang online trading login 26 and the only construction by which the provisions of Regulations 25 and 26 will be given full effect to and rendered workable.

This will also prevent Regulation 25 from being rendered unconstitutional. Apart from intention, it has also to be nirmal bang online trading login as a fact that the depression in the prices of the securities was artificial. Hence, it will have to be shown that the depression in share prices was an unreal or a fake or a temporary one.

In the instant case, it is absolutely clear that the depression in share prices was an unreal or a fake or a temporary one. Various Indian Companies had overseas listings. If SEBI does not admit the above factors responsible then it has to prove its version. It can not go by surmises and conjunctures. One fact alone establishes that the depression in the share prices of the concerned scrips was not an artificial one but was a real one.

The prices of shares continued a downward spiral even after 15th March upto August If, as alleged, the depression in the prices were artificial and brought about by the alleged acts of the Appellants, then nirmal bang online trading login and after 18th April,when the Appellants broking operations were suspended, the trend would have been reversed.

It was impossible for the Appellants to have depressed nirmal bang online trading login prices of the concerned scrips in view of the following: Referred to the following chart showing the equity capital and market capitalization of the concerned scrips together with the average traded volumes in the said stocks.

By way of illustration referred to Global Tele, that against a capital of Rs. Trades transacted by nirmal bang online trading login Appellant was just 2. No inference can be drawn on the basis of the data that such a small percentage of trade was responsible for depressing the market. SEBI has not bothered to find out who are the persons who traded in the balance All the stocks listed above have a huge market capitalization and substantial holdings by the FIIs and Indian Financial Institutions and are highly liquid and actively traded scrips.

FIIs had cumulative sales of Rs. Any attempt to depress the nirmal bang online trading login of the said shares "artificially" would result in an immediate buying from the various FIIs and FIs.

Requisite intention not established. Before a person can be held guilty of violating Regulation 4 a of the FUTP Regulations, it must be established that the transaction in securities were effected or entered into with the intention of artificially depressing the prices of securities.

This intention will have to be determined inter alia on a consideration of the factors:

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