Securities and Exchange Board of India Act 1992: ss. 12(A) (a), (b), (c), ss. 15Z, 15HA, 15HB, ss. 11, 11(4), 11B/19 – Prohibition of manipulative and deceptive devices, insider trading and substantial acquisition of securities or control – On facts, appellant engaged in manipulative trade as a result share price of a company came to be manipulated – Order passed by the Whole Time MemberWTM prohibiting the appellant from carrying on trading in its proprietary account, for a period of four years – Thereafter, the adjudicating officer imposed penalty of Rs 15 lakhs – During the pendency of the proceedings before the tribunal, the appellant was directed to deposit Rs two crores with SEBI, conditional upon which the order passed by the WTM was directed to remain stayed – On appeal, held: WTM while imposing an order of debarment, specifically applied its mind to the impact of manipulation of the price of scrips – Impact of a manipulation cannot be assessed only in terms of the gain caused to the participants themselves, but in terms of the wider consequences of the action on the securities market – In view thereof, the order passed by the WTM cannot be regarded as disproportionate – Moreover, WTM prohibited the appellant from participating in its proprietary account for a specified period, leaving it open to continue operation in their broking account – Thus, the order passed by the WTM not interfered with – Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market Regulations 2003.
Dismissing the appeals, the Court
HELD: 1.1 In the instant case, the Whole Time MemberWTM, while imposing an order of debarment, has specifically applied its mind to the issue as regards the impact of such a manipulation. While dealing with this aspect, the WTM observed that the manipulation of the price of scrips seriously impinges upon other counter parties in the securities market. In other words, the impact of a manipulation which is carried out by a participant in the securities market cannot be assessed only in terms of the gain which has been caused to the participants themselves, but in terms of the wider consequences of the action on the securities market. [Para 12][825-A-C]
1.2 The securities market deals with the wealth of investors. Any such manipulation is liable to cause serious detriment to investors’ wealth. The order which has been passed by the WTM cannot be regarded as disproportionate so as to result in the interference of this Court in the exercise of its jurisdiction u/s. 15Z of the Securities and Exchange Board of India Act 1992. Moreover, the WTM has prohibited the appellant from participating in its proprietary account for a specified period, leaving it open to the appellant to continue operation in their broking account. [Para 14][826-B-C]
Adjudicating Officer, Securities and Exchange Board of India v. Bhavesh Pabari (2019) 5 SCC 90;
N. Narayanan v. SEBI (2013) 12 SCC 152 : [2013] 6 SCR 391 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
This page is for informational and research purposes only and does not constitute legal advice. Consult a qualified advocate for advice specific to your situation.