SECURITIES APPELLATE

TRIBUNAL
INVESTMENT LAW PROJECT

SUBMITTED TO:
MR. VIKAS GUPTA
(INVESTMENT LAW PROF.)

SUBMITTED BY:
ANGNA DEWAN
A3221510056
BBA LLB (H)
2011-201

ACKNOWLEDGEMENT

I would like to express profound gratitude to Mr. Vikas

Gupta, for his invaluable support, encouragement, supervision
and useful suggestions throughout this research work. His moral
support and continuous guidance enabled me to complete my
work successfully. His intellectual thrust and blessings
motivated me to work rigorously on this study. In fact this study
could not have seen the light of the day if his contribution had
not been available.

Angna Dewan
A3221510056
BBA LLB (H)
2011-2016
2

CONTENTS
SECURITIES APPELLATE TRIBUNAL
- ESTABLISHMENT
- COMPOSITION
- QUALIFICATION FOR APPOINTMENT
- PROCEDURE FOR FILING APPEALS
- FEES
APPEAL TO SECURITIES APPELLATE
POWERS TO SECURITIES APPELLATE
TRIBUNAL
DELISTING SECURITIES
APPEAL TO SUPREME COURT
POWERS AND FUNCTIONS OF REGISTRAR
CASE
CONCLUSION
BIBLIOGRAPHY
Securities Appellate Tribunal

Securities Appellate Tribunal is a statutory body established under the provisions of Section 15K
of the Securities and Exchange Board of India Act, 1992 to hear and dispose of appeals against
orders passed by the Securities and Exchange Board of India or by an adjudicating officer under
the Act and to exercise jurisdiction, powers and authority conferred on the Tribunal by or under
this Act or any other law for the time being in force. SAT (Securities Appellate Tribunals) is the
appellate authority for capital market decisions taken by the Securities & Exchange Board of
India.
Establishment of Securities Appellate Tribunals.(1) The Central Government shall, by notification, establish one or more Appellate Tribunals to
be known as the Securities Appellate Tribunal to exercise the jurisdiction, powers and authority
conferred on such Tribunal by or under this Act [or any other law for the time being in force.]
(2) The Central Government shall also specify in the notification referred to in sub-section (1)
the matters and places in relation to which the Securities Appellate Tribunal may exercise
jurisdiction.
Composition of Securities Appellate Tribunal.
A Securities Appellate Tribunal shall consist of a Presiding Officer and two other Members, to be
appointed, by notification, by the Central Government:1
Provided that the Securities Appellate Tribunal, consisting of one person only, established before
the commencement of the Securities and Exchange Board of India (Amendment) Act, 2002, shall
continue to exercise the jurisdiction, powers and authority conferred on it by or under this Act or
any other law for the time being in force till two other Members are appointed under this section.
Qualification for appointment as Presiding Officer or Member of the Securities Appellate
Tribunal.
(1) A person shall not be qualified for appointment as the Presiding Officer of a Securities
Appellate Tribunal unless he is a sitting or retired Judge of the Supreme Court or a sitting or
retired Chief Justice of a High Court:

1 Given under Section 15 L of Securities Exchange Board of India Act 1992.

Provided that the Presiding Officer of the Securities Appellate Tribunal shall be appointed by the
Central Government in consultation with the Chief Justice of India or his nominee. 2
(2) A person shall not be qualified for appointment as Member of a Securities Appellate Tribunal
unless he is a person of ability, integrity and standing who has shown capacity in dealing with
problems relating to securities market and has qualification and experience of corporate law,
securities laws, finance, economics or accountancy:
Provided that a member of the Board or any person holding a post oat senior management level
equivalent to Executive Director in the Board shall not be appointed as Presiding Officer or
Member of a Securities Appellate Tribunal during his service or tenure as such with the Board or
within two years from the date on which he ceases to hold office as such in the Board.
Tenure of office of Presiding Officer and other Members of Securities Appellate Tribunal.
The Presiding Officer and every other Member of a Securities Appellate Tribunal shall hold
office for a terms of five years from the date on which he enters upon his office and shall be
eligible for re-appointment:
Provided that no person shall hold office as the Presiding Officer of the Securities Appellate
Tribunal after he has attained the age of sixty-eight years:
Provided further that no person shall hold office as Member of the Securities Appellate Tribunal
after he has attained the age of sixty-two years.3

Salary and allowances and other terms and conditions of service of Presiding Officers
Section 15 O provides that salary and allowances payable to and the other terms
and conditions of service including pension, gratuity and other retirement benefits
of the Presiding Officer and other Members of a Securities Appellate Tribunal shall
be such as may be prescribed.

2 Given under Section 15 M Securities Exchange Board of India Act 1992.

3

Given under section 15 N Securities Exchange Board of India Act 1992.

4 Substituted for Presiding Officer of a Securities Appellate Tribunal by the SEBI

(Amendment) Act 2002, w.e.f. 29-10-2002

However neither the salary and allowances nor the other terms and conditions of
service of the [Presiding Officer and other Members of a Securities Appellate
Tribunal] shall be varied to their disadvantage after appointment. 5

Filling up of Vacancies
If, for reason other than temporary absence, any vacancy occurs in the 6 office of the
Presiding Officer or any other Member of a Securities Appellate Tribunal, then the
Central Government shall appoint another person to fill the vacancy and the
proceedings may be continued before the Securities Appellate Tribunal from the
stage at which the vacancy is filled.

Resignation and Removal

Section 15Q (1) provides that the 7Presiding Officer or any other Member of a
Securities Appellate Tribunal may, by notice in writing addressed to the Central
Government, resign his office: The Presiding Officer or any other Member shall,
unless he is permitted by the Central Government to relinquish his office sooner,
continue to hold office, until the expiry of three months from the date of receipt of
such notice or until a person duly appointed as his successor enters upon his office
or until the expiry of his term of office, whichever is the earliest.
Section 15Q (2) provides that the Presiding Officer shall not be removed from his
office except by an order by the Central Government on the ground of proved
misbehavior or incapacity after an inquiry made by a Judge of the Supreme Court, in
which the Presiding Officer or any other Member] concerned has been informed of
the charges against him and given a reasonable opportunity of being heard in
respect of these charges.

5 Substituted for Presiding Officer, by the SEBI (Amendment) Act 2002, w.e.f. 29-10-2002
6 Substituted for said Presiding Officer, by the SEBI (Amendment) Act 2002, w.e.f. 29-102002.
7 Substituted for Presiding Officer, by the SEBI (Amendment) Act 2002, w.e.f. 29-10-2002.

Section 15Q (3) The Central Government may, by rules, regulate the procedure for
the investigation of misbehavior or incapacity of the Presiding Officer or any other
Member.8

Procedure for filing appeals

(1) A memorandum of appeal shall be presented in the form annexed to these rules by the
Appellant either in person to the Registrar of the Appellate Tribunal within whose jurisdiction his
case falls or shall be sent by registered post addressed to such Registrar.
(2) Where the appellant is company a memorandum of appeal may be preferred, (a) By one or more legal practitioners authorized by such company; or
(b) By any of the officers of such company to act as Presenting Officers and every person so
authorized may present the appeal before the Appellate Tribunal.
(3) Where the appellant is other than a company he may prefer an appeal in person or by his
agent or by a duly authorized legal practitioner.
(4) An appeal sent by post under sub-rule (1) shall be deemed to have been presented to the
Registrar on the day on which it is received in the office of the Registrar.
(5) The appeal under sub-rule (1) shall be presented in four sets in a Paper Book along with an
empty file size envelope bearing full address of the respondent and where the number of
respondents are more than one, then sufficient number of extra paper books together with empty
file size envelope bearing full addresses of each respondent shall be furnished by the appellant.
Presentation and scrutiny of memorandum of appeal 9
6. (1) The Registrar shall endorse on every appeal the date on which it is presented under that
rule and shall sign endorsement.
8 www.sebi.gov.in/commreport/clause49.htm
9 www.icsi.edu/WebModules/LinksOfWeeks/CS_NOV2013.pdf

(2) If, on scrutiny, the appeal is found to be in order, it shall be duly registered and given a serial
number.
(3) If an appeal on scrutiny is found to be defective and the defect noticed is formal in nature, the
Registrar may allow the appellant to rectify the same in his presence and if the said defect is not
formal in nature, the Registrar, may allow the appellant such time to rectify the defect as he may
deem fit.
(4) If the concerned appellant fails to rectify the defect within the time allowed in sub-rule (3),
the Registrar may by order and for reasons to be recorded in writing, decline to register such
memorandum of appeal.
(5) An appeal against the order of the Registrar under sub-rule (4) shall be made within fifteen
days of making of such order to the Presiding Officer concerned in his chamber, whose decision
thereon shall be final.
Place of filing memorandum of appeal
7. The memorandum of appeal shall be filed by the appellant with the Registrar of the Appellate
Tribunal having jurisdiction in the matter.
Fee
8. (1) Every memorandum of appeal under section 15T of the Act shall be accompanied with a
fee provided in sub-rule (2) and such fee may be remitted either in the form of crossed demand
draft drawn on a nationalized bank in favor of the Registrar and payable at the station where the
Registrar's office is situated or remitted through a crossed Indian Postal Order drawn in favor of
the Registrar and payable in Central Post Office of the Station where the Appellate Tribunal is
located. 10
(2) The amount of fee payable in respect of appeal under section 15T shall be as follows:TABLE
AMOUNT OF PENALTY IMPOSED
1. Less than rupees ten thousand;
2. Rupees ten thousand or more but less than one lakhs;
3. Rupees one lakh or more.

AMOUNT OF FEES PAYABLE

Rs.500
Rs.1200
Rs.1200 plus Rs.1000

10 http://www.sebi.gov.in/cms/sebi_data/attachdocs/1379572440984.pdf

for every additional

one lakh of penalty.
Deposit of amount of penalty
9. Where an appeal is preferred by a person under section 15T of the Act, such appeal shall not
be entertained by the Appellate Tribunal unless such person has deposited with the Appellate
Tribunal the amount of penalty imposed by the Adjudicating Officers.
Provided that the Appellate Tribunal may, for reasons to be recorded in writing, waive or reduce
the amount to be deposited with the Appellate Tribunal.
Contents of memorandum of appeal 11
10. (1) Every memorandum of appeal filed under rule 5 shall set forth concisely under distinct
heads, the grounds of such appeal without any argument or narrative, and such grounds shall be
numbered consecutively and shall be typed in double line space on one side of the paper.
(2) It shall not be necessary to present separate memorandum of appeal to seek interim order or
direction if in the memorandum of appeal, the same is prayed for.
Documents to accompany memorandum of appeal
11. (1) Every memorandum of appeal shall be triplicate and shall be accompanied with two
copies (at least one of which shall be certified copy) of the order of Division Chief under Chapter
VI A of the Act against which the appeal is filed.
(2) Where the parties to the appeal are being represented by an agent, documents authorizing him
to act as such agent shall also be appended to the appeals.
Provided that where an appeal is filed by a local practitioner, it shall be accompanied by a duly
executed Vakalatnama.
(3) Where a company is being represented by any of its Officers to act as Presenting Officer
before the Appellate Tribunal, the document authorizing him to act as Presenting Officer shall be
appended to the memorandum of appeal. 12
Plural remedies
11 http://www.nyse.com/Frameset.html?displayPage=/listed/1022540125610.html
12 www.oecd.org/dataoecd/3/10/43056196.pdf

12. A memorandum of appeal shall not seek relief or reliefs based on more than a single cause of
action in one single memorandum of appeal unless the reliefs prayed for are consequential to one
another. Endorsing copy of appeal to the Board
13. A copy of the memorandum of appeal and paper book shall be served on the Board, as soon
as they are filed, by the Registrar by registered post.
Filing of reply to the appeal and other documents by the respondent or the Board
14. (1) The respondent or the Board may file four complete sets containing the reply to the
appeal along with documents in a paper book form13 with the registry within one month of the
service of the notice on him of the filing of the memorandum of appeal.
(2) The respondent or the Board shall also endorse one copy of the reply to the appeal along with
documents as mentioned in sub-rule (1) to the appellant.
(3) The Appellate Tribunal may, in its discretion on application by the respondent or the Board,
allow the filing of reply referred to in sub-rule (1), after the expiry of the period referred to
therein.
Date and place of hearing to be notified
15. The Appellate Tribunal shall notify the parties the date and place of hearing of the appeal in
such a manner as the Presiding Officer may by general or special order direct.
Appeal to the Securities Appellate Tribunal.
Section 15(T) provides14 an opportunity to a person aggrieved,(a)

by an order of the Board made, on and after the commencement of the Securities Laws

(Second Amendment) Act, 1999, under this Act, or the rules or regulations made thereunder; or

13 http://www.sebi.gov.in/acts/act18f1.html
14 Substituted for Sub-sec (1) & (2) by the SEBI (Amendment) Act 1999, w.e.f. 16-12-1999.
Prior to their substitution, Sub-sections (1) & (2) were read as under: (1) Save as provided
in sub-section (2), any person aggrieved by any order made by any Adjudicating Officer
under this Act, may prefer an appeal to a Securities Appellate Tribunal having jurisdiction in
the matter. (2) No appeal shall lie to the Securities Appellate Tribunal from an order made by
an Adjudicating Officer with the consent of the parties.

10

(b) By an order made by an adjudicating officer under this Act, may prefer an appeal to a
Securities Appellate Tribunal having jurisdiction in the matter.
15(T) (2) No appeal shall lie to the Securities Appellate Tribunal from an order made__
(a) By the Board on and after the commencement of the Securities Laws (Second Amendment)
Act, 1999;
(b) By an adjudicating officer, with the consent of the parties.
(3) Every appeal under sub-section (1) shall be filed within a period of forty-five days from the
date on which [a copy of the order made by the Board or the adjudicating officer, as the case may
be,] is received by him and it shall be in such form and be accompanied by such fee as may be
prescribed 15:
Provided that the Securities Appellate Tribunal may entertain an appeal after the expiry of the
said period of forty-five days if it is satisfied that there was sufficient cause for not filing it
within that period.
(4) On receipt of an appeal under sub-section (1), the Securities Appellate Tribunal may, after
giving the parties to the appeal, an opportunity of being heard, pass such orders thereon as it
thinks fit, confirming, modifying or setting aside the order appealed against. 16
(5) The Securities Appellate Tribunal shall send a copy of every order made by it to the [Board,
the parties] to the appeal and to the concerned Adjudicating Officer.
(6) The appeal filed before the Securities Appellate Tribunal under sub-section
(1) Shall be dealt with by it as expeditiously as possible and endeavor shall be made by it to
dispose of the appeal finally within six months from the date of receipt of the appeal.17

15 Substituted for a copy of the order made by the adjudicating officer by SEBI
(Amendment) Act 1999, w.e.f. 16-12-1999
16 Substituted for parties, SEBI (Amendment) Act 1999, w.e.f. 16-12-1999
17 www.oecd.org/dataoecd/3/10/43056196.pdf

11

Powers of Securities Appellate Tribunal:

Section 15U (1) provides that the Securities Appellate Tribunal shall not be bound by procedure
laid down by CPC, 1908, but shall be guided by the principles of natural justice, and subject to
the provisions of this Act and of any rules, the SAT shall have powers to regulate their own
procedure including the placing at which they shall have their sittings.18
Section 15U(2) provides that the Securities Appellate Tribunal shall have, for the purpose of
discharging their functions under this Act, the same powers as are vested in a civil court under
the Code of
Civil Procedure, 1908 (5 of 1908), while trying a suit, in respect of the following matters,
namely:
(a) Summoning and enforcing the attendance of any person and examining him on oath;
(b) Requiring the discovery and production of documents;
(c) Receiving evidence on affidavits;
(d) Issuing commissions for the examination of witnesses or documents;
(e) Reviewing its decisions;
(f) Dismissing an application for default or deciding it ex parte;
(g) Setting aside any order of dismissal of any application for default or any order passed by it ex
parte; and
(h) Any other matter which may be prescribed.
Section 15U (3) provides that every proceeding before the Securities Appellate Tribunal shall be
deemed to be a judicial proceeding within the meaning of sections 193 and 228, and for the
purposes of section 196 of the Indian Penal Code (45 of 1860) and the Securities Appellate
Tribunal shall be deemed to be a civil court for all the purposes of section 195 and Chapter
XXVI of the Code of Criminal Procedure, 1973 (2 of 1974).

Civil court not to have jurisdiction.

18 www.sebi.gov.in/cms/sebi_data/attachdocs/1413803106939.pdf

12

No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter
which a Securities Appellate Tribunal is empowered by or under this Act to determine and no
injunction shall be granted by any court or other authority in respect of any action taken or to be
taken in pursuance of any power conferred by or under this Act.

Delisting of securities
(1) A recognized stock exchange may delist the securities, after recording the reasons therefore,
from any recognized stock exchange on any of the ground or grounds as may be prescribed under
this Act:
(2) A listed company or an aggrieved investor may file an appeal before the Securities Appellate
Tribunal against the decision of the recognized stock exchange delisting the securities within
fifteen days from the date of the decision of the recognized stock exchange delisting the
securities and the provisions of sections 22B to 22E of this Act, shall apply, as far as may be, to
such appeals:
Provided that the Securities Appellate Tribunal may, if it is satisfied that the company was
prevented by sufficient cause from filing the appeal within the said period, allow it to be filed
within a further period not exceeding one month.19
Right of appeal against refusal of stock exchanges to list securities of public companies.
Where a recognized stock exchange acting in pursuance of any power given to it by its bye-laws,
refuses to list the securities of any public company [or collective investment scheme], the
company[or scheme] shall be entitled to be furnished with reasons for such refusal, and may,
(a) Within fifteen days from the date on which the reasons for such refusal are furnished to it, or
(b) where the stock exchange has omitted or failed to dispose of, within the time specified in subsection (1) of section 73 of the Companies Act, 1956(hereafter in this section referred to as the
specified time), the application for permission for the shares or debentures to be dealt with on
19
http://www.ifc.org/wps/wcm/connect/6ab71c8048a7e7b3accfef6060ad5911/Focus_ENFCorpG
ov3.pdf?MOD=AJPERES

13

the stock exchange, within fifteen days from the date of expiry of the specified time or within
such further period, not exceeding one month, as the Central Government may, on
sufficient cause being shown, allow, appeal to the Central Government against such refusal,
omission or failure, as the case may be, and thereupon the Central Government may, after giving
the stock exchange an opportunity of being heard,
(i) Vary or set aside the decision of the stock exchange, or
(ii) Where the stock exchange has omitted or failed to dispose of the application within the
specified time, grant or refuse the permission, and where the Central Government sets aside the
decision of the recognized stock exchange or grants the permission, the stock exchange shall act
in conformity with the orders of the Central Government.

Appeal to Supreme Court.

Section 15 Z provides that any person aggrieved by any decision or order of the Securities
Appellate Tribunal may file an appeal to the Supreme Court within sixty days from the date of
communication of the decision or order of the Securities Appellate Tribunal to him on any
question of law arising out of such order:
Provided that the Supreme Court may, if it is satisfied that the appellant was prevented by
sufficient cause from filing the appeal within the said period, allow it to be filed within a further
period not exceeding sixty days.20

Right of appeal to Securities Appellate Tribunal against refusal of stock exchange to list
securities of public companies
20 Substituted for section15Z by the SEBI (Amendment) Act, 2002, w.e.f. 29-10-2002. Prior
to its substitution, it read as under:- 15Z. Appeal to High Court.- Any person aggrieved by
any decision or order of the Securities Appellate Tribunal may file an appeal to the High
Court within sixty days from the date of communication of the decision or order of the
Securities Appellate Tribunal to him on any question of fact or law arising out of such order:
Provided that the High Court may, if it is satisfied that the appellant was prevented by
sufficient cause from filing the appeal within the said period, allow it to be filed within a
further period not exceeding sixty days.

14

(1) Where a recognized stock exchange, acting in pursuance of any power given to it by its byelaws, refuses to list the securities of any company, the company shall be entitled to be furnished
with reasons for such refusal, and may,
(a) Within fifteen days from the date on which the reasons for such refusal are furnished to it, or
(b) Where the stock exchange has omitted or failed to dispose of, within the time
specified in sub-section (1A) of section 73 of the Companies Act, 1956 (1 of 1956), (hereafter in
this section referred to as the specified time), the application for permission for the shares or
debentures to be dealt with on the stock exchange, within fifteen days from the date of expiry of
the specified time or within such further period, not exceeding one month, as the Securities
Appellate Tribunal may,
on sufficient cause being shown, allow, appeal to the Securities Appellate Tribunal having
jurisdiction in the matter against such refusal, omission or failure, as the case may be, and
thereupon the Securities Appellate Tribunal may, after giving the stock exchange, an opportunity
of being heard,
(i) Vary or set aside the decision of the stock exchange; or
(ii) Where the stock exchange has omitted or failed to dispose of the application within the
specified time, grant or refuse the permission, and where the Securities Appellate Tribunal sets
aside the decision of the recognized stock exchange or grants the permission, the stock exchange
shall act in conformity with the orders of the Securities Appellate Tribunal.
(2) Every appeal under sub-section (1) shall be in such form and be accompanied by such fee as
may be prescribed.
(3) The Securities Appellate Tribunal shall send a copy of every order made by it to the Board
and parties to the appeal.
(4) The appeal filed before the Securities Appellate Tribunal under sub-section (1) shall be dealt
with by it as expeditiously as possible and endeavour shall be made by it to dispose of the appeal
finally within six months from the date of receipt of the appeal.

Powers and functions of the Registrar

15

(1) The Registrar shall have the custody of the records of the Appellate Tribunal and shall
exercise such other functions as are assigned to him under these rules or by the Presiding Officer
by a separate order in writing. 21
(2) The official seal shall be kept in the custody of the Registrar.
(3) Subject to any general or special direction by the Presiding Officer, the seal of the Appellate
Tribunal shall not be affixed to any order, summons or other process have under the authority in
writing from the Registrar. 22
(4) The seal of the Appellate Tribunal shall not be affixed to any certified copy issued by the
Appellate Tribunal save under the authority in writing of the Registrar.
Additional powers and duties of Registrar
In addition to the powers conferred elsewhere in these rules, the Registrar shall have the
following powers and duties subject to any general or special orders of the Presiding Officer
namely:(1) to receive all appeals and other documents;
(2) to decide all question arising out of the scrutiny of the appeals before they are registered;
(3) to require any appeal presented to the Appellate Tribunal to be amended in accordance with
the rules;
(4) subject to the directions of the Presiding Officer to fix date of hearing of the appeals or other
proceedings and issue notices thereof;
(5) direct any formal amendment of records;
(6) to order grant of copies of documents to parties to proceedings;
21 Substituted for section15Z by the SEBI (Amendment) Act, 2002, w.e.f. 29-10-2002. Prior
to its substitution, it read as under:- 15Z. Appeal to High Court.- Any person aggrieved by
any decision or order of the Securities Appellate Tribunal may file an appeal to the High
Court within sixty days from the date of communication of the decision or order of the
Securities Appellate Tribunal to him on any question of fact or law arising out of such order:
Provided that the High Court may, if it is satisfied that the appellant was prevented by
sufficient cause from filing the appeal within the said period, allow it to be filed within a
further period not exceeding sixty days.
22 Substituted by the Depositories (Appeal to Securities Appellate Tribunal) (Amendment)
Rules, 2005 w.e.f. 31.1.2005. Prior to its substitution, sub-rule (4) read as under: Subject to
any general or special direction by the Presiding Officer, the official seal of the Appellate
Tribunal shall not be affixed to any order, summons or other process save under the
authority in writing from the Registrar.

16

(7) to grant leave to inspect the record of Appellate Tribunal;

(8) dispose of all matters relating to the service of notices or other processes, application for the
issue of fresh notice or for extending the time for or ordering a particular method of service on a
respondent including a substituted service by publication of the notice by way of advertisements
in the newspapers;
(9) to requisition records from the custody of any court or other authority.

CASE
IN THE SECURITIES APPELLATE TRIBUNAL MUMBAI
Appeal No. 108 of 2007
Date of decision : 23.10.2007
Pilot Credit Capital Limited Appellant
Versus
1. The Adjudicating Officer,
Securities and Exchange Board of India
2. Securities and Exchange Board of India Respondents
Mr. R.K. Pandey, FCA for the Appellant.
Dr. Poornima Advani Advocate with Ms. Sejal Shah Advocate for the Respondents.
Coram : Justice N.K. Sodhi, Presiding Officer
Arun Bhargava, Member
Utpal Bhattacharya, Member
Per : Justice N.K. Sodhi, Presiding Officer (Oral)
17

Sudden spurt in the price and trading volumes of shares of some companies had been engaging
the attention of the Securities and Exchange Board of India (for short the Board). IFSL Limited
(for short the company) which was listed on the Bombay Stock Exchange (BSE) was one such
company. Detailed investigations were ordered to look into the trading of the scrip and on the
basis of the material collected by the Board, it passed an ex-parte interim order on September 28,
2005 restraining, among others, one Jay Shah from buying, selling or dealing in the scrip of the
company directly or indirectly till further directions. This ex-parte order was immediately put up
by the Board on its website and was sent to the Stock Exchanges across the country including the
BSE. It is not in dispute that BSE on receipt of that order put it on its website and also put up the
same on its notice board for the information of all and sundry. Rule 67 of the Rules framed by
the BSE provides that a notice to the general body of its members may be published by posting
the same on the notice board and every member shall be deemed to be affected by such notice
immediately after it is posted.
Jay Shah, the barred entity had been trading in the scrip of the company through
India Infoline Securities Ltd. as his broker. After the passing of the ex-parte order on September
28, 2005 Jay Shah did not trade in the scrip of the company through his earlier broker and
approached the appellant which is also a member of the BSE and a registered stock broker with
the Board. It is common case of the parties that despite the restraint order passed by the Board,
Jay Shah traded in the scrip of the company through the appellant as his broker on 11.10.2005
and 14.10.2005. On both these days the appellant executed a number of trades on behalf of Jay
Shah and traded in as many as 1,92,993 shares of the company. This trading was obviously
contrary to the restraint order passed by the Board. We are informed that the Board has taken
appropriate action against Jay Shah for violating the restraint order. Since the appellant had acted
as a broker it was also served with a show cause notice dated February 2, 2006 alleging that it
had not exercised due skill, care and diligence while executing trades on behalf of Jay Shah as
required of
a stock broker in terms of para A(2) of Schedule II of the Code of Conduct prescribed for stock
brokers. The appellant was required to show cause why penalty be not levied against it under
section 15HB of the Securities and Exchange Board of India Act, 1992 (for short the Act). The
appellant filed its reply stating that it had no knowledge of the restraint order dated September
28, 2005. It was pleaded that the appellant was not a party to the restraint order nor was the said
18

order served on it either by the Board or by the BSE and since it was not aware of the same it had
committed no violation whatsoever. On a consideration of the material available on the record
the adjudicating officer came to the conclusion that the appellant was guilty of not exercising due
skill,care and diligence as a stock broker and as a result of its negligence, it allowed a debarred
entity to trade in the scrip of the company. Accordingly, by his order dated April 5, 2007 he
imposed a monetary penalty of Rs. 5 lacs on the appellant. It is against this order that the present
appeal has been filed under section 15T of the Act.
We have heard Dr. Rajnish Pandey, Chartered Accountantthe authorized representative of the
appellant and also the learned counsel for the Board. What is contended on behalf of the
appellant is that it was not aware of the restraint order dated September 28, 2005 and, therefore,
it could not have violated any of the provisions of Code of Conduct prescribed for the stock
brokers under the Securities and Exchange Board of India (Stockbrokers and Sub-Brokers)
Regulations, 1992 (hereinafter called the Regulations). The learned counsel for the respondent,
on the other hand, pointed out that the restraint order was on the website of the Board as well as
of the BSE and that the appellant as a stock broker was required to access the same while dealing
with its clients on whose behalf it was executing trades in the securities market. She relied upon
Rule 67 of the Rules framed by the BSE referred to in the earlier part of the order. We have given
our thoughtful consideration to the rival contentions of the parties and are of the view that the
charge levelled against the appellant stands established on the facts of this case. Para A in
Schedule II to the Regulations prescribes the Code of Conduct for stock brokers. It provides that
a stock broker shall maintain a high standard of integrity, promptitude and fairness in the conduct
of all his business and that he shall act with due skill, care and diligence in the context of his
business. The short question that we are required to answer is whether the appellant acted with
due skill, care and diligence while executing trades on behalf of Jay Shah on 11.10.2005 and
14.10.2005. Admittedly, on those dates Jay Shah had been debarred by the Board from trading in
the scrip of the company. We are prepared to accept the plea of the appellant that it was not
aware of the restraint order but that will not absolve the appellant from performing its duty as a
stock broker which it was required to do under the Code of Conduct. The charge against the
appellant is not that it allowed a debarred entity from trading in the scrip of the company. The
charge is that it had failed to exercise due skill, care and diligence while executing the trades.
The appellant is a member-broker of the BSE. The least that was expected from it was that it
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should have accessed the website of the BSE to make himself aware of the various notices,
orders and circulars issued by it or by the Board. Had it done so, it would have become aware of
the restraint order which, as already observed, was on the website of both the BSE and the
Board. In that event it would not have allowed Jay Shah to trade in the scrip of the company. Not
having done so we are clearly of the view that the appellant was negligent in the performance of
its duties as a stock broker and that it failed to exercise due skill, care and diligence while
executing the trades in question. The consequences of this culpable negligence have been rather
grave. A barred entity was allowed to trade in the market which is detrimental to the interests of
the investors and also to the market itself. In this view of the matter, we uphold the impugned
order.
The learned authorized representative of the appellant then urged that the penalty levied by the
adjudicating officer is highly excessive and the impugned order is harsh. We do not think so in
view of the grave consequences that flow from the negligence of the appellant. In the result, the
appeal fails and the same is dismissed with no order as to the costs.

CONCLUSION
SAT body may get more powers
The Securities Appellate Tribunal (SAT) will be the umbrella financial markets appellate tribunal
and suitably renamed.
The government is considering a common appellate authority for insurance and all instruments
traded on the stock or commodity exchanges. This comes after the formation of the Financial
Stability Development Council, a statutory body to coordinate the functioning of financial
market regulators.

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Bibliography
http://www.sebi.gov.in/acts/act15ac.html
http://www.moneycontrol.com/news-topic/securities-appellate-tribunal/
http://www.sebi.gov.in/acts/act18f1.html
http://sat.gov.in/ENGLISH/PDF/E0000_RT12.PDF
http://www.rawlaco.in/detail/5793.aspx
http://www.sebi.gov.in/acts/depositories.pdf
http://www.sebi.gov.in/cms/sebi_data/attachdocs/1379572440984.pdf

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