SECURITIES AND EXCHANGE BOARD OF INDIA versus KISHORE R. AJMERA

Citation: [2016] 1 S.C.R. 1118 · Decided: 23-02-2016 · Supreme Court of India · Bench: RANJAN GOGOI · Disposal: Disposed off

Cited by 10 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

[2016] I S.C.R. 1118 
A 
SECURITIES AND EXCHANGE BOARD OF INDIA 
v. 
KISHORE R. AJMERA 
(Civil Appeal No.2818 OF 2008) 
B 
FEBRUARY 23, 2016 
c 
[RANJAN GOGOi AND PRAFULLA C. PANT, JJ.) 
Securities and Exchange Board of India Act, I992 - s. 19 -
Securities and Exchange Board of India (Stock Brokers and Sub-
Brokers) Regulations, 1992 - Reg 9 - Securities and Exchange 
Board of India (Prohibition of Fraudulent and Unfair Trade 
Practices Relating to the Securities Market) Regulations, 2003 -
SEBI (Procedure for Holding Enquiry by Enquiry Officer and 
Imposing Penalty) Regulations, 2002 - Reg 13(4) - Fraudulent/ 
manipulative practices under the SEBI Regulations and violation 
D of the Conduct Regulations by the brokers and sub-brokers - Degree 
of proof required to hold them liable - Power of imposition of penalty 
- In the first category, sub broker acting through broker, allegedly 
involved in creating artificial volumes in the illiquid scrips and 
Member, SEBI held the broker liable and ordered suspension for 
four. months -
In second category, sub brokers allegedly 
E synchronized trades in respect of a huge number of illiquid scrip in 
quick succession of time - In third category, allegation that 
respondent-broker alongwith other member brokers, indulged in 
circular trading of the scrip on behalf of one client and suspension 
of respondent's membership for one month - Tribunal holding that 
F 
in the absence of any direct proojlevidence showing the involvement 
of broker and sub-broker, charges not substantiated, and interfered 
with the penalty - On appeal, held: As regards power of imposition 
of penalty for manipulative or fraudulent practices or for violation 
of the Regulation, I 992, no clarity in the parallel provisions 
contained in the Act and the Regulations - Comprehensive legislation 
G can bring more clarity and certainty on the norms - In the instant 
case, there is no direct evidence forthcoming - In the first category, 
inference of negligence/lack of due care etc., not established even 
on proof of the primary facts alleged so as to make broker liable 
which was rightly upheld by the tribunal - As regards the second 
H 
1118 
0>totll v. KISHORE R. AJMERA 
and third category, conclusion has to be gathered from various 
circumstances like the volume of the trade effected; the period of 
persistence in trading in the particular scrip; the particulars of the 
buy and sell orders, namely, the volume thereof; the proximity of 
time between the two and such other relevant factors - It is clear 
from all these surrounding facts and circumstances that there has 
been transgressions by the respondents beyond the permissible 
dividing line between negligence and deliberate intention - If the 
primary authority had thought it proper to impose different penalties 
in different cases involving different set of facts, interference should 
not be made - Orders of the tribunal set aside and penalty imposed 
on brokers by SEBI restored. 
Disposing of the appeals, the Court 
HELD: 1.1 The views are recorded on a somewhat unclear 
if not a confused picture that emanates from parallel provisions 
contained in the Act and the Regulations framed thereunder. This 
is particularly in the context of the power of imposition of penalty 
on determination of liability either for manipulative or fraudulent 
practices or for violation of the Code of Conduct Regulation, 1992. 
The different Regulations including the Regulations that prescribe 
the procedural course, namely, SEBI (Procedure for Holding 
Enquiry by Enquiry Officer and imposing Penalty) Regulations 
2002 and the successor Regulation i.e. SEBI (Intermediaries) 
Regulations 2008 contain identical and parallel provisions with 
regard to imposition of penalty resulting in myriad provisions 
dealing with the same situation. A comprehensive legislation can 
bring )!bout more clarity and certainty on the norms governing 
the security/capital market and, therefore, would best serve the 
interest of strengthening and securing the capital market. 
[Para 20][1135-C-El 
1.2 It is a fundamental. principle of law that proof of an 
allegation levelled against a person may be in the form of direct 
substantive evidence or, as in many cases, such proof may have 
to be inferred by a logical process of reasoning from the totality 
of the attending facts and circumstances surroundi11g the 
allegations/charges made and levelled. While direct evidence is 
a more certain basis to come 

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