Securities Appellate Tribunal
Hrim Finance And Securities Private ... vs Sebi on 1 June, 2012
BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Appeal No. 119 of 2012
Date of Decision: 01.06.2012
HRIM Finance and Securities Private Limited
177/179, Kalbadevi Road,
Laxmi House, 3rd Floor,
Mumbai - 400 002. ...Appellant
Versus
National Stock Exchange of India Limited "NSEIL"
Exchange Plaza, Bandra Kurla Complex,
Bandra East, Mumbai. ...Respondent
Mr. Dipan Merchant, Senior Advocate with Mr. Shailesh Kanojia, Advocate for the
Appellant.
Mr. Shiraz Rustomjee, Senior Advocate with Mr. Sunil Tilokchandani and Ms. Shambhavi
Arjunwadkar, Advocates for the Respondent.
CORAM : P. K. Malhotra, Member & Presiding Officer (Offg.)
S.S.N. Moorthy, Member
Per : P. K. Malhotra (Oral)
The short question that arises for our consideration in this appeal is whether in the
facts and circumstances of the case the National Stock Exchange of India Ltd. (NSE) was
justified in passing order dated April 18, 2012 blocking an amount of ` 90 lacs from the
deposits of the appellant as an interim measure pending enquiry against the appellant for
certain irregularities with regard to maintenance of accounts of its clients.
2. The appellant is a stock broker registered with the NSE. NSE conducted inspection
of books of account of the appellant and came to a prima facie conclusion that the appellant
had charged its clients excessive amounts of late pay in charges and penalty with an ulterior
motive of debiting the clients account and not paying the credit balance in clients account.
Pending enquiry, NSE passed the impugned order stating "as an interim risk containment
measure it has been decided that Rs. 90 lakhs be blocked from your deposits till further
notice on which no exposure would be available".
3. The grievance of the appellant is that there is no provision whereby the inspection
department could pass such an order blocking the deposits and not giving exposure on the
said amount. According to learned senior counsel for the appellant, action of the NSE
amounts to prejudging the matter when the parties have preferred an arbitration which
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clearly established that the claimant themselves were not sure and they wanted the said issue
to be decided by the arbitrators.
4. We have heard the learned senior counsel for the parties and are of the view that the
appeal can be disposed of at the admission stage itself. Action was initiated against the
appellant by the respondent for charging the clients excessive amount of late pay in charges
and penalty, for not paying the credit balance in clients account and for certain other
charges. Learned senior counsel for the NSE has brought to our notice the provisions of
regulation 7.4.2(c) of the Regulation-Part A (Capital Market Segment), issued by the NSE
which empowers it to take action forthwith without giving an opportunity of hearing to the
appellant under certain circumstances. Similar provision exist in the regulations issued in
the F & O Segment. Learned senior counsel for the NSE states that the action was
authorised by the managing director of the NSE and has also been ratified by the
disciplinary committee. Having seen the said provisions, we are of the view that NSE is
competent to take the interim measure as has been taken by it in the impugned order.
Initiation of arbitration proceedings by the clients against the appellant has nothing to do
with the initiation of the disciplinary action by the NSE in exercise of its disciplinary power.
A show cause notice has already been issued to the appellant on May 2, 2012 to which the
appellant has already responded. The proceedings are pending at the stage of personal
hearing which is yet to be granted. We are, therefore, not inclined to interfere in the matter
at this stage of the enquiry. Respondent may grant personal hearing to the appellant
expeditiously and pass appropriate order within two months thereafter. We make it clear
that we are not expressing any opinion on the merits of the case which should be decided by
the NSE in accordance with law.
The appeal stands disposed of accordingly with no order as to costs.
Sd/-
P.K. Malhotra
Member &
Presiding Officer (Offg.)
Sd/-
S.S.N. Moorthy
Member
1.6.2012 Prepared and compared by RHN 3