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Showing contexts for: market manipulation in Bpl Limited vs Securities & Exchange Board Of India on 20 June, 2002Matching Fragments
18. Shri Chinoy submitted that to hold that a public limited company indulged in manipulation it is necessary to establish the willfull act or intend of those managing the company. "Intention" is an ingredient of regulation 4(a) and 4(d). In this connection Shri Chinoy referred to the Respondent's following observation in para 13.3 of the order that "BPL has further contended that any charge of market manipulation must involve malafide on the part of the alleged manipulator and has further stated that a malafide intention cannot be attributed to an artificial person like BPL. It is an established position of law that a company may be criminally liable for a breach of provision of the Act or other statutory duties, although a company may not be liable for certain offences under the penal code. The Courts have recognised that regarding criminal liability involving mens rea, the mental element of those in control and management of the company is attributed to the company itself". In this context learned Senior Counsel submitted that the charge of market manipulation implies an improper motive or intention that when such a charge is levelled against an artificial person or body corporate, it is necessary for the party making the charge to establish that the controlling/directing mind of the artificial person, that is, the Board of Directors or a committee of directors or the shareholders in general meeting, were involved in manipulation, that the subject transactions were never put up before the Board of the Appellant or a committee of its directors or before its shareholders. In this context he referred to the following authorities (i) Esso Standard Inc v. Udharam B Japanwalla 1975(45) Co.cases 16(Bom), (ii) ANZ Grindlays v. Director of Enforcement, decided by the Hon'ble Bombay High Court on 7.11.1998 in W.P.No.1972/1994 etc.)
21. Shri Chinoy submitted that the principle laid down in the cited cases is applicable to prosecution and adjudication. He stated that in regulation 4(a) and 4(d) specific requirement of intend is there. The impugned order also charges the Appellant acting in "connivance" with Shri Harshad Mehta by 'aiding' "abetting" and "instrumental in effecting transactions resulting in market manipulations". He submitted that conspiracy, abatement, etc., involve sound intend. He stated that the Appellant being a corporal body has no mind independent of those in control, that the order does not even suggest that any one in control in the Appellant was involved in manipulating market that even, Shri Chauhan's role is stated to be restricted only to advance of loans. Shri Chinoy stated that there is nothing in the order to show that loan was given to BSFL by the Appellant with the intend to manipulate the market.
This, therefore concludes the question regarding the standard of proof."
36. Shri Chinoy submitted that all the decisions cited above arise out of civil proceedings. Since the charge levelled against the Appellant is quasi criminal in nature, evidence required to prove the charge should beyond doubt. He also stated that since the charge levelled against the Appellant is accusatory in nature, it is quasi criminal.
37. Shri Chinoy explained the ingredients of regulation 4 and stated that it is on prohibition on the market manipulation and clauses (a) to (e) are the type of market manipulations prohibitted. He stated that the manipulation is a fraud and the charge of fraud whether in a civil or criminal proceedings need be established beyond doubt. In support of this submission he relied on the observations made by the Hon'ble Supreme Court in the following cases:
118. Scope of regulation 4(a) and (d) was elaborately argued by learned Senior Counsel appearing for the parties. While Shri Chinoy vehemently argued that the said regulations are not attracted, Shri Dada in equal force emphasised that these regulations are attracted. In this context it is considered necessary to examine the scope and reach of the said regulation 4(a) and (d), to begin with.
119. On a perusal of regulation 4 it is clear that prohibition is against market manipulations stated in clauses (a) to (e) therein. According to the impugned order the Appellant company indulged in the type of market manipulation referred to at clause (a) and (d) . Text of the regulation has been already extracted above. To attract regulation 4(a) (i) a person should have effected, taken part in, or entered into either directly or indirectly, transactions in securities (ii) the transactions must be with an intention (iii) such transaction must be to artificially raise or depress the prices of securities (iv) the result of the action must be to induce the sales or purchase of securities by any person. The ingredients of regulation 4(d) are that (i) a person must enter into a purchase or sale of any securities (ii) said purchase or sale must not be intended to effect the transfer of beneficial ownership (iii)the purchase or sale must be intended to operate only as a device to inflate, depress or cause fluctuations in the market price of securities. On a perusal of the regulation it is clear that reach of clause (a) is wider than the reach of clause (d). Regulation 4(a) brings not only the purchaser and seller but even third parties also to its ambit , if they are found in any way involved in effecting or taking part in the transactions directly or indirectly. The motive behind the action and the effect of the actions is also relevant. Transactions in securities, with the intention of raising or depressing the prices of securities and thereby inducing the sale or purchase of securities by any person is the pointer in this regard. Artificial action to induce other persons to transact in securities is the core theme of regulation 4(d). According to Blacks Law Dictionary "deceit" means " a fraudulent and deceptive misrepresentation, artifice or device used by one or more persons to deceive and trick another, who is ignorant of the true facts, to the prejudice and damage of the party imposed upon". The caption of Chapter II referred to above is also a pointer in this regard. On a careful perusal of the regulation it is clear as Shri Chinoy pointed out that element of deceit is an underlying factor in the transaction. A genuine transaction by itself cannot attract the regulation though such a transaction had resulted in market price variation . Regulation 4(a) attracts only if the transaction is made with an intention of artificially raising or depressing the prices of securities so as to induce any other person to sell or purchase the securities. The participation need not necessarily be direct, it can be indirect as well, as pointed out by Shri Dada.