BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Appeal No. 1 of 2007 Date of decision: 9.9.2008
Dilip S. Pendse …… Appellant Versus
The Adjudication Officer, Securities and Exchange Board of India …… Respondent
Mr. Rohit Kapadia Senior Advocate with Mr. V. M. Singh Advocate for the Appellant. Mr. J.J. Bhatt Senior Advocate with Mr. Kumar Desai, Ms. Daya Gupta and Ms. Cloris John Advocates for the Respondent.
Coram: Justice N.K. Sodhi, Presiding Officer
Arun Bhargava, Member
Utpal Bhattacharya, Member
Per: Justice N.K. Sodhi, Presiding Officer (Oral) This order will dispose of three Appeals no.1 to 3 of 2007 in which common questions of law and fact arise and they are directed against the same order dated September 27, 2006 passed by the adjudicating officer imposing a monetary penalty of Rs.5 lacs on each of the appellants.
We have heard the learned senior counsel for the parties at length. Since we are remanding these cases back to the adjudicating officer, it is not necessary to state the facts in detail. We are also not commenting on the merits of the case and the contentions raised by the learned senior counsel lest any observation made by us prejudices the case of either party. The appellants have been charged with insider trading and adjudication proceedings were initiated against them. They have denied the charges levelled in the show cause notice and have taken some defences which we feel have not been properly dealt with by the adjudicating officer in the impugned order. The appellants are placing strong reliance on the contract notes issued by the broker which show that the transactions were between the appellants and the broker on a principal to principal basis and that the trades were reported to the Bombay Stock Exchange in September 2000. Whether these trades were actually executed and whether they were reported to the exchange as claimed by the appellants are issues which the adjudicating officer will have to examine and record
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findings thereon in the light of the fact that the shares were delivered in March 2001. There is a dispute as to when the payment was made by the purchasers. The primary question that needs to be decided in these cases is whether the shares were sold by the appellants in September 2000 as claimed by them or in March 2001 which is the allegation in the show cause notice. Admittedly, the appellants were not in possession of any unpublished price sensitive information in September 2000 whereas they had that information in March 2001. The fact that they are insiders is not in dispute. The complaint received from Tata Finance Limited whose shares were traded allegedly on the basis of inside information does not appear to have been properly gone into. The complaint clearly alleges that the reporting made by the broker had been antedated and that the appellants had indulged in insider trading. Having regard to the facts and circumstances of the case, we are of the view that the adjudicating officer should enquire into the complaint afresh together with other irregularities, if any, found during the course of the investigations. We, therefore, allow the appeals, set aside the impugned order and remit the cases back to the adjudicating officer to do the needful by issuing fresh show cause notice(s) to the appellants and thereafter pass a fresh order in accordance with law after affording an opportunity of hearing to them. As the matter pertains to the year 2000-2001, the adjudicating officer is directed to conduct the proceedings expeditiously. We have no doubt that the appellants will cooperate with the adjudicating officer in the early disposal of the proceedings. Needless to mention that all contentions raised by the parties are left open to be decided by the adjudicating officer in accordance with law. No costs.
Sd/-
Justice N.K. Sodhi
Presiding Officer
Sd/-
Arun Bhargava
Member
Sd/-
Utpal Bhattacharya
Member
9.9.2008
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