BEFORE THE SECURITIES APPELLATE TRIBUNAL MUMBAI Date of Decision: 24.9.2019 Appeal No.37 of 2019 CAB Securities Limited 24/4866, Ansari Road, Darya Ganj, Delhi – 110002. …. Appellant Versus National Stock Exchange of India Limited Exchange Plaza, Plot no.C/1, G-Block, Bandra Kurla Complex, Bandra (East), Mumbai – 400 051. … Respondent Mr. Prakash Shah, Advocate with Mr. Chinmay Paradkar, Advocate i/b. Prakash Shah & Associates for the Appellant. Mr. Rashid Boatwala, Advocate with Ms. Shreya Anuwal, Advocate i/b. Manilal Kher Ambalal & Co. for the Respondent. CORAM: Justice Tarun Agarwala, Presiding Officer Dr. C.K.G. Nair, Member Justice M.T. Joshi, Judicial Member Per : Justice Tarun Agarwala (Oral)

1. The appellant is a broker and is registered with the

National Stock Exchange of India Ltd. (hereinafter referred to as ‘NSE’). Pursuant to the inspection of the books of account of the appellant, a show cause notice was issued and, after considering the reply, the Disciplinary Action Committee (hereinafter referred to as ‘DAC’) passed an order dated 20th July, 2018 imposing a monetary penalty of Rs.31,88,600/- to the extent of 100% false reporting and also directed that the trading membership of the appellant in F&O Segment would be suspended for a period of one day after giving three weeks’ notice. The appellant being aggrieved filed a review application which was rejected by an order dated 17th January,

2019. The appellant has thereafter preferred the present appeal.

2. The DAC in its order observed that the appellant had

falsely reported the margin in F&O Segment on three instances of its client namely Mr. Gopal Prasad and that such false reporting was in violation of NSE circular dated 20th January,

2014. The committee found that the margin should be collected

from the client and not from other sources. In the instant case, the collection of margin from brother-in-law, brother and cousin brother was not permitted under the Exchange’s circular dated 14th December, 2011.

3. Before us the learned counsel fairly conceded that there

was 100% of false reporting to the tune of Rs.91,27,375 and only prayed leniency in the penalty contending that in the given circumstances the penalty should be reduced proportionately.

4. Having heard the learned counsel for the parties at some

length we find that there was false reporting to the tune of Rs.91,27,375. Under SEBI’s circular dated 10th August, 2011 it was provided that if during inspection it was found that a member had reported falsely the margin collected from clients, the member would be penalized 100% of the reported amount alongwith suspension of trading for one day in that segment.

5. In the light of the aforesaid circular the penalty in our

view ought to have been Rs.91,27,375 i.e. to the tune of 100% of false reporting. Considering the principle of proportionality as per SEBI Circular dated 1st August, 2019 we find that in the instant case only Rs.31,88,600 has been levied which is approximately one third of the total penalty that could have been imposed. Considering the aforesaid, we do not find any manifest error in the impugned order either in the imposition of penalty of Rs.31.88 lakh or in the suspension of trading for one day.

6. The appeal consequently fails and is dismissed with no

order as to costs. Sd/- Justice Tarun Agarwal Presiding Officer Sd/- Dr. C. K. G. Nair Member Sd/- Justice M.T. Joshi Judicial Member 24.9.2019 Prepared and compared by RHN