Case: Securities Exchange Board Of India Vs. M/S Opee Stock-Link Ltd

Rs.1170/- per share to the respondents. These transactions are, therefore, definitely of fishy nature. 18. The submission to the effect that no Retail Individual Investor had made any complaint to the SEBI is not at all relevant because the SEBI need not act only on the basis of a complaint received. If from its independent sources, the SEBI, after due enquiry comes to know about some illegality or irregularity, the SEBI has to act in the manner as it acted in the instant case. The fact, however, remains that because of the undue advantage which the respondents got, some small investors or RII must have not got the shares, which they ought to have been allotted.19. The learned counsel for the respondents also made a submission that a common address given by several demat account holders would not show any irregularity. We do not agree with the said submission, because normally a person would give his own address when he is opening his demat account. Rarely, a person would give someone else’s address if he is not having any permanent address or is likely to shift his residence. In the instant case, not one or a few, but several demat holders had given one particular address and it is also pertinent to note that upon initiation of an inquiry at the instance of the SEBI, most of the demat accounts had been closed by the demat account holders. 20. The submission was also to the effect that the shares could have been sold before they were listed with a stock exchange and such a sale cannot be said to be an illegality. Looking at the fact that number of persons, having common address of their demat accounts, selling their shares at the same price to a particular person before listing of shares of a company with a stock exchange is not a normal thing. In the facts and circumstances of the case, we do not accept the said submission made by the learned counsel appearing for the respondents. 21. We also note that the Securities Contracts (Regulation) Act, 1956 (SCRA) has been enacted to prevent undesirable transactions in securities by regulating the business of dealing therein, by providing for certain other matters connected therewith like regulating functioning of recognised stock exchanges and working of the members of such stock exchanges. The SCRA is a special law to regulate the sale and purchase of shares and securities and hence it prevails over the provisions of the Indian Contract Act, 1872 and Sale of Goods Act, 1930, insofar as the matters which are specifically dealt with by the SCRA. The contracts for sale and purchase of securities, as envisaged under the SCRA, can be entered into only in a prescribed manner in a notified area and that can only be effected through registered members of a recognised stock exchange (i.e. stock brokers) and the only exception to this is a Spot Delivery Contract. 22. ‘Spot Delivery Contract’ is defined in Section 2(i) of the SCRA as a contract, which – “(a) provides for actual delivery of securities and the payment of a price thereof either on the date of the contract or on the next day, excluding the time involved in dispatch of shares and remittance of money where parties do not reside in the same town/locality;(b) transfer of securities by depository from the account of one beneficial owner (demat account) to the account of other beneficial owner (demat account) were securities involved are in demat form.” Section 2(i)(b) of the SCRA was introduced in the statute book with effect from September 20, 1995. It is clear from the aforestated definition of ‘Spot Delivery Contract’ that to enter into such a contract, the seller has to effect actual delivery of securities and the buyer has to pay the price therefore either on the same day or on the next day and further, the said transfer should be coupled with transfer of the Securities from one Beneficial Owner (BO) to another. Considering the scope of Spot Delivery Contract as defined in Section 2(i) of the SCRA in Bhagwati Developers Pvt. Ltd. v. Peerless General Finance and Investment Company Ltd. & Anr. (2013) 9 SCC 584 , this Court has held as under :- “...... a contract providing for actual delivery of securities and the payment of price thereof either on the same day as the date of contract or on the next day means a spot delivery contract.” Considering the facts and circumstances of the present case, the transfer of shares did not comply with the requirements of the provision of either Section 13 or Section 2(i) of the SCRA. Therefore, the off market trading indulged into by the Respondents was rightly held to be per se illegal by the Whole Time Member.23. The submission made to the effect that the Tribunal is a final fact finding authority cannot be disputed. According to the learned counsel, the facts found by the SAT should not be disbelieved by this Court. However, for coming to a definite conclusion contrary to the findings arrived at by the lower authority, the appellate authority, in the instant case, the SAT, ought to have recorded specific reasons for arriving at a different conclusion, but we do not find any sound reason for coming to a different conclusion in the impugned order. On the other hand, we find detailed discussion for coming to a particular conclusion in the order, which was passed by the Whole Time Member of the SEBI and therefore, we do not see any reason for the SAT to disturb the said finding without mentioning any strong and justifiable reason for coming to a different conclusion. 24. For the aforestated reasons and in view of the submissions made by the learned counsel appearing for the appellant for sustaining the orders passed by the Whole Time Member as well as the Adjudicating Officer of the SEBI, we quash and set aside the impugned order passed by the SAT.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]are of the view that the Whole Time Member as well as the Adjudicating Officer of the SEBI were justified in imposing penalty upon the respondents for the reasons recorded bythe facts and circumstances of the present case, the transfer of shares did not comply with the requirements of the provision of either Section 13 or Section 2(i) of the SCRA. Therefore, the off market trading indulged into by the Respondents was rightly held to be per se illegal by the Whole Time Member.23. The submission made to the effect that the Tribunal is a final fact finding authority cannot be disputed. According to the learned counsel, the facts found by the SAT should not be disbelieved by this Court. However, for coming to a definite conclusion contrary to the findings arrived at by the lower authority, the appellate authority, in the instant case, the SAT, ought to have recorded specific reasons for arriving at a different conclusion, but we do not find any sound reason for coming to a different conclusion in the impugned order. On the other hand, we find detailed discussion for coming to a particular conclusion in the order, which was passed by the Whole Time Member of the SEBI and therefore, we do not see any reason for the SAT to disturb the said finding without mentioning any strong and justifiable reason for coming to a different conclusion.