Securities Appellate Tribunal
Iifl Securities Limited vs Sebi on 1 September, 2021
Author: Tarun Agarwala
Bench: Tarun Agarwala
BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Order Reserved On: 30.07.2021
Date of Decision : 01.09.2021
Appeal No. 512 of 2019
IIFL Securities Limited
(Erstwhile India Infoline Limited)
IIFL House, Sun Infotech Park,
MIDC, Plot No. 23B,
Wagle Estate,
Thane ...Appellant
Versus
Securities and Exchange Board of India,
SEBI Bhavan, Plot No. C-4A, G-Block,
Bandra-Kurla Complex, Bandra (East),
Mumbai- 400 051 ...Respondent
Mr. Nimay Dave, Advocate with Mr. Ankur Loona, Ms. Aparna
Wagle, Ms. Swapna Roopavate and Ms. Divya Dhawan,
Advocates i/b Alliance Law for the Appellant.
Mr. Kumar Desai, Advocate with Mr. Mihir Mody, Mr. Arnav
Misra and Mr. Mayur Jaisingh, Advocates i/b K. Ashar & Co.
for the Respondent.
CORAM: Justice Tarun Agarwala, Presiding Officer
Justice M. T. Joshi, Judicial Member
Per: Justice M. T. Joshi, Judicial Member
1. Aggrieved by the decision of the learned Adjudicating
Officer (hereinafter referred to as "AO") of respondent
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Securities and Exchange Board of India (hereinafter referred to
as "SEBI") dated July 31, 2019 imposing a penalty of Rs. 3 lakh
for violation of the provisions of Clause A (2) of the Code of
Conduct for Stock Brokers as specified under Schedule II read
with Regulation 7 of SEBI (Stock Brokers and Sub- Brokers)
Regulations, 1992 (hereinafter referred to as "Stock Brokers
Regulations"), the present appeal is preferred.
2. The appellant is a stock broker and one Smt. Vimala Devi
Kalantri was his client. Respondent, SEBI had started
investigation for a period between March and May 2011 in the
scrip of Saint- Gobain Sekurit India Limited (hereinafter
referred to as "SGSIL"). In the investigation it was found that
the son-in-law of the client Vimala Devi i.e. one Mr. Atul
Saraogi had carried certain trades in the said SGSIL though he
was involved in the advisory transaction of the said company.
Thus, the investigation prima facie found that said Mr. Atul
Saraogi had carried certain transactions being insider.
During the investigation it was also found that on October 23,
2018 in the account of Smt. Vimala Devi Kalantri certain
transactions were carried in the scrip of said SGSIL. The order
was however placed by wife of Mr. Atul Saraogi i.e. the
daughter of the appellant namely, Ms. Sapna Saraogi from the
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mobile number belonging to Mr. Atul Saraogi. When enquiry
was made by respondent - SEBI, with the appellant it was
confirmed by the appellant that on the verbal instructions from
Smt. Vimala Devi Kalantri to accept trade order from Mr. Atul
Saraogi and Mrs. Sapna Saraogi the orders were executed.
Since this conduct of the appellant as a stock broker was
allegedly against the Clause A (2) of the Code of Conduct for
Stock Brokers as specified under Schedule II read with
Regulation 7 of SEBI (Stock Brokers and Sub- Brokers)
Regulations, 1992 the show cause notice was issued against the
present appellant and the present proceeding was conducted.
3. The appellant submitted that in the transactions no
abnormality was found by the appellant. It has not violated any
provisions of the rules or regulations. The appellant had over
10 lakh clients and the orders were executed servicing the client
as per the system and process put in place as per the SEBI/
Exchange norms in the process of normal course of servicing. It
further explained that on the oral instructions of the client the
orders were accepted and executed on the instructions of her
daughter namely, Mrs. Sapna Saraogi. Since the
communications were from one of the family member of the
client through the registered mobile number, the appellant had
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accepted the request of the client in good faith. Therefore it
sought exoneration.
4. The appellant further pointed that in a different scrip the
appellant was already penalized in the amount of Rs. 2 lakhs by
the respondent vide order dated February 23, 2018 for the
similar violation as the appellant had accepted the order in the
account of Smt. Vimala Devi Kalantri, on the oral instructions
of Mr. Atul Saraogi. It was in the scrip of United Spirits
Limited. In such circumstances, the appellant pleaded that the
rule of res judicata would be applicable as the issue is finally
heard and decided by respondent - SEBI and therefore the
appellant can not be made to face the same litigation twice. The
learned AO however did not agree with the appellant, hence the
present appeal.
5. We have heard Mr. Nimay Dave, the learned counsel for
the appellant and Mr. Kumar Desai, the learned counsel for the
respondent.
6. The learned counsel for the appellant submits that the
appellant was penalized for carrying the similar oral instructions
of the client of accepting the orders from her daughter or son-in-
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law in another scrip. Now for every transaction separate penalty
is being imposed and, thus, the matter is hit by the principle of
res judicata. He further submitted that the appellant had in
good faith acted on the oral instructions of the client for
acceptance of the order in her account either from her daughter
or her son-in-law. As the instructions came from her registered
mobile number the same were accepted in due course while
dealing with lakhs of transactions of lakhs of customers. He,
therefore, submitted that the appeal be allowed.
7. On the other hand, the learned counsel for the respondent
specifically pointed out the provisions and more particularly
Clause 20 of the Member Client agreement dated April 19, 2010
between the appellant and Smt. Vimala Devi Kalantri.
8. Upon hearing both side, in our view there is no merit in
the appeal. The same is therefore liable to be dismissed for the
following reasons.
9. It is to be noted that Schedule II of the Stock Brokers
Regulations provides for Code of Conduct for stock brokers.
Provides that the stock broker is required to exercise due skill
care and diligence in the conduct of all his business. Clause 20
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of the Member Client agreement dated April 19, 2010 between
the appellant and Smt. Vimala Devi Kalantri clearly provided
that if a letter is issued by the client authorizing another person
to give instructions on behalf of the client then those
instructions would be binding on the client. The appellant who
is a seasoned stock broker is supposed to know the importance
of having written authority from a client permitting any other
entity to transact in the account on his/her behalf. In the
circumstances, the appellant cannot escape the liability.
10. As regard the issue of res judicata it should be noted that
the principle is applicable if the facts are heard and decided
finally by the competent authority then the issue comprising
those facts cannot be heard again. Here, the issue is of another
violation by the appellant of the same nature. It is not the case
that the respondent was raising the same grievance twice in the
same scrip. The principle of res judicata therefore would not be
applicable.
11. In the result, the following order:-
ORDER
The appeal is hereby dismissed without any order as to costs.
712. The present matter was heard through video conference due to Covid-19 pandemic. At this stage it is not possible to sign a copy of this order nor a certified copy of this order could be issued by the Registry. In these circumstances, this order will be digitally signed by the Private Secretary on behalf of the bench and all concerned parties are directed to act on the digitally signed copy of this order. Parties will act on production of a digitally signed copy sent by fax and/or email.
Justice Tarun Agarwala Presiding Officer Justice M. T. Joshi Judicial Member 01.09.2021 RAJALA Digitally by signed PK KSHMI NAIR RAJALAKSHMI H Date: 2021.09.02 H NAIR 11:41:15 +05'30'