Securities Appellate Tribunal
M/S. Dse Financial Services Ltd. A ... vs Sebi on 11 September, 2012
BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Appeal No. 153 of 2012
Date of decision: 11.09.2012
M/s. DSE Financial Services Ltd.
A subsidiary of Delhi Stock Exchange Limited
...Appellant
DSE House, 3/1, Asaf Ali Road,
New Delhi - 110 002.
Versus
Securities and Exchange Board of India
SEBI Bhavan, Plot No. C-1A, G-Block,
... Respondent
Bandra Kurla Complex, Mumbai - 400 051.
Mr. Shambhu Nath Singh, Advocate for the Appellant. Mr. Prateek Seksaria, Advocate with Mr. Mobin Shaikh, Advocate for the Respondent. CORAM : P. K. Malhotra, Member & Presiding Officer (Offg.) S. S. N. Moorthy, Member Per : P. K. Malhotra (Oral) The appellant before us is a subsidiary of Delhi Stock Exchange Limited and registered with the Securities and Exchange Board of India (the Board) as a stock broker of the National Stock Exchange of India Limited, Bombay Stock Exchange Limited and also as a depository participant of Central Depository Services (India) Limited.
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2. The Board carried out inspection of the appellant during February 8-23, 2007 with regard to its activities as a stock broker and also as a depository participant. During inspection, the Board noticed certain deficiencies with regard to manipulation of records and in the functioning of the appellant and observed that it has violated certain provisions of the Securities and Exchange Board of India Act, 1992, the Securities Contracts (Regulation) Act, 1956, The Depositories Act, 1996 and the rules and regulations framed thereunder with regard to maintenance of its records. After affording an opportunity of hearing, the adjudicating officer of the Board, by its order dated April 10, 2012, imposed a penalty of ` 4 lacs on the appellant under sections 15F & 15HB of the Act and section 19G of the Depositories Act, 1996. Hence this appeal.
3. We have heard learned counsel for the parties for some time who have taken us through the record. We have specifically looked into the observations made by the adjudicating officer in para 206 of his order which reads as under:
"In respect of the said submissions of the Noticee, I have noted that the inspections have not revealed any unlawful gains made by the Noticee by indulging into such violations/non-compliances. It is also not possible from the information/details available with me to arrive at the figures for the unlawful gains made by the Noticee or the loss suffered by the investors. Further, the available details do not suggest that the Noticee had indulged repetitively in such violations/non- compliances. I have noted that the violations committed by the Noticee are mostly technical in nature. While some of those are solitary instances, for others the Noticee has mostly taken/initiated corrective measures."
Under similar circumstances in one of the cases decided by us earlier (Religare Securities Limited vs. SEBI Appeal no. 23 of 2011 decided on 16.6.2011), we have observed that it must be remembered that the purpose of carrying out inspection is not punitive and the object is to make the intermediary comply with the procedural requirements in regard to the maintenance of records. We have also observed that every minor discrepancy/irregularity found during the course of inspection is not culpable and the object of the inspection could well be achieved by pointing out the irregularities/deficiencies to the intermediary at the time of inspection and making it compliant. As per the observations made by the adjudicating officer himself, the 3 violations committed by the appellant are mostly technical in nature; some of them are solitary instances and for others the appellant has mostly taken/initiated corrective measures. In view of this, we are of the view that the adjudicating officer was not justified in taking punitive action.
We, therefore, set aside the impugned order and allow the appeal with no order as to costs Sd/-
P. K. Malhotra Member & Presiding Officer (Offg.) Sd/-
S.S.N. Moorthy Member 11/9/2012 Prepared & compared by-ddg