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Mr. Pradip Sancheti Advocate with Mr. Vineet Jagtap Advocate for the Appellant. Dr. Mrs. Poornima Advani Advocate with Ms. Sejal Shah Advocate for the Respondent. 

Coram:     Justice N.K. Sodhi, Presiding Officer
           Utpal Bhattacharya, Member

Per : Justice N.K. Sodhi, Presiding Officer

Whether the appellant executed trades on behalf of its client with the intention of artificially raising the price of the scrip of JIK Industries Limited (for short JIK) is the short question that arises for our consideration in this appeal filed under section 15T of the Securities and Exchange Board of India Act, 1992 (for short the Act). It is directed against the order dated March 28, 2006 passed by the adjudicating officer holding the appellant guilty of having executed trades with a view to artificially raise the price of the scrip of JIK thereby violating Regulation 4(a) of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995 (hereinafter called the Regulations). Facts giving rise to this appeal lie in a narrow compass and these may first be noticed.

2. Jagruti Securities Limited (the appellant) is a company incorporated under the Companies Act, 1956. It is a member of the Bombay Stock Exchange (BSE) and the National Stock Exchange Ltd. (NSE) and has been carrying on business of stock broking since the year 1991. The Securities and Exchange Board of India (hereinafter called the Board) conducted investigations in the scrip of JIK for the period from January 23, 2003 to April 1, 2003 and found that some irregularities had been committed during the course of the trading in the scrip. The appellant on behalf of its clients Axtel Industries Limited (Axtel) and Ameet Parikh had executed the trades in the scrip of JIK during the period of investigation. The details of the trades are as under:

"In view of the aforesaid findings of the investigation carried out by SEBI, it is charged that you were interested in the price rise of the scrip of JIK and therefore placed buy orders in small quantities at the higher price than the last traded price of the scrip of JIK with the intention of artificially raising the price of the scrip of JIK. Your transactions resulted in reflection of price of the scrip of JIK based on non-genuine trade transactions and as such you violated the provisions of Reg.4(a) and 4(c) of Securities and Exchange Board of India (Prohibition of Fraudulent and unfair Trade Practices in Securities market) Regulations, 1995."

5. Now let us see what the adjudicating officer has found. In para 4.6 of the impugned order he rightly observes that "To establish the charge of artificial trades, the nexus of the parties needs to be established." Having said this, he observes that there is no allegation of nexus between Ameet Parikh and the appellant and JIK. He is wrong when he observes that there is no nexus between Ameet Parikh and the appellant. The nexus is obvious. Ameet Parikh is the client and the appellant is his broker and the nexus between the two is well understood by law as well as by the market. Needless to say that every client has a nexus with the broker through whom he trades. In para 4.15 of the order the adjudicating officer has found that there is a nexus between the appellant and JIK and he is right. Smt. Jagruti Parikh is a director in the appellant company whereas her husband Shri R. G. Parikh is a director in JIK. We can assume that these two companies were associate entities but this association is of no consequence. In fact, the adjudicating officer is unclear about the parties between whom nexus needs to be established. Nexus between the buyer and his broker or between the broker and the company whose scrip is being traded is not relevant in this context. In order to establish the charge of artificially raising the price of the scrip of JIK, it has to be shown that there was a nexus between the buyer Ameet Parikh and the appellant on the one hand and the seller counter party or his broker on the other. We cannot lose sight of the fact that Ameet Parikh had bought the shares through the appellant as his broker and a nexus had to be established between him and the seller before the trades could be dubbed as artificial. There is no such allegation in the show cause notice nor any finding recorded in the impugned order. In the absence of such a nexus it cannot be said that the appellant acting on behalf of Ameet Parikh was artificially raising the price of the scrip of JIK. The charge must, therefore, fail.