Devichand Hansraj Oswal Vs. Securities and Exchange Board of India - Court Judgment

Excerpt:
1. by order dated 12.1.2006 the securities and exchange board of india (for short "the board") suspended the certificate of registration of the appellant which is a registered sub-broker. the charges proved against the appellant on the basis of which the impugned order has been passed are - 1) that he did not maintain proper books of accounts and records and thereby violated regulation 21 of the brokers regulations 2) the contract notes received by him as a sub-broker did not bear details like trade number, trade time, order number etc. this too is said to be in violation of circular dated 14.9.1999. 3) the appellant did not cooperate with the inspection team at the time when the latter carried out inspection of the business premises.2. as regards the non-maintenance of books of accounts, it has been found that the appellant has not maintained the sauda book which is necessary to be maintained in which all transactions are required to be entered. the learned counsel for the appellant undertakes on behalf of his client that this book shall now be maintained not only for the future but even the past entries shall be recorded therein after obtaining the details from the concerned stock exchange. the explanation furnished by the learned counsel for the appellant for not maintaining this book is that the appellant had no clients and that he was carrying on business as a proprietor. that may be so but it is necessary that he should maintain the sauda book. now that the appellant has undertaken to prepare this book and maintain it in future we do not think that the violation is that grave. the appellant will furnish an affidavit within a week from today stating that he has maintained the book and will undertake the exercise of recording the past transactions as well.3. the second charge again does not seem to be very serious. the contract notes received by the appellant did not contain the requisite information. the fault really lies with the broker(s) and/or sub-brokers who were sending those contract notes and the only default committed by the appellant was that he did not inform the stock exchange or the board in this regard. the third charge levelled against the appellant is that he did not cooperate with the inspection team.this fact is stoutly denied.4. after hearing the learned counsel for the parties and having gone through the impugned order we are clearly of the view that the penalty of suspension of the certificate of registration for a period of two months in the circumstances of the present case is too harsh and disproportionate to the gravity of the irregularities committed by the appellant. we therefore modify the impugned order and impose a monetary penalty of rs. 50,000/- on the appellant. he is directed to deposit this amount in the consolidated fund of india within two weeks from today failing which the board will take appropriate action in accordance with law.5. the appeal stands disposed of as above leaving the parties to bear their own costs.

Judgment:
1. By order dated 12.1.2006 the Securities and Exchange Board of India (for short "the Board") suspended the certificate of registration of the appellant which is a registered sub-broker. The charges proved against the appellant on the basis of which the impugned order has been passed are - 1) that he did not maintain proper books of accounts and records and thereby violated Regulation 21 of the Brokers Regulations 2) the contract notes received by him as a sub-broker did not bear details like trade number, trade time, order number etc. This too is said to be in violation of circular dated 14.9.1999. 3) the appellant did not cooperate with the inspection team at the time when the latter carried out inspection of the business premises.

2. As regards the non-maintenance of books of accounts, it has been found that the appellant has not maintained the Sauda book which is necessary to be maintained in which all transactions are required to be entered. The learned counsel for the appellant undertakes on behalf of his client that this book shall now be maintained not only for the future but even the past entries shall be recorded therein after obtaining the details from the concerned stock exchange. The explanation furnished by the learned counsel for the appellant for not maintaining this book is that the appellant had no clients and that he was carrying on business as a proprietor. That may be so but it is necessary that he should maintain the Sauda book. Now that the appellant has undertaken to prepare this book and maintain it in future we do not think that the violation is that grave. The appellant will furnish an affidavit within a week from today stating that he has maintained the book and will undertake the exercise of recording the past transactions as well.

3. The second charge again does not seem to be very serious. The contract notes received by the appellant did not contain the requisite information. The fault really lies with the broker(s) and/or sub-brokers who were sending those contract notes and the only default committed by the appellant was that he did not inform the stock exchange or the Board in this regard. The third charge levelled against the appellant is that he did not cooperate with the inspection team.

This fact is stoutly denied.

4. After hearing the learned counsel for the parties and having gone through the impugned order we are clearly of the view that the penalty of suspension of the certificate of registration for a period of two months in the circumstances of the present case is too harsh and disproportionate to the gravity of the irregularities committed by the appellant. We therefore modify the impugned order and impose a monetary penalty of Rs. 50,000/- on the appellant. He is directed to deposit this amount in the Consolidated Fund of India within two weeks from today failing which the Board will take appropriate action in accordance with law.

5. The appeal stands disposed of as above leaving the parties to bear their own costs.