sebi:WTM/GA/53/ISD/2/08
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Facts / Headnote
Confirmed the ad interim ex parte order dated April 27, 2006 against Shri Pratik Mafatlal Shah
Provisions invoked
- s. 19
- s. 11(4)
- s. 11
- s. 12(3)
Regulations
- Reg. 3
Parties
- Shri Pratik Mafatlal Shah
Holding
The ad interim ex parte order dated April 27, 2006 restraining Shri Pratik Mafatlal Shah from buying, selling or dealing in the securities market including IPOs is confirmed.
Full text
Page 2 of 20 1.2 In the above facts and circumstances, SEBI vide an ad interim ex parte order dated April 27, 2006 inter alia directed various key operators including Shri Pratik Mafatlal Shah (hereinafter referred to as Shri Shah) not to buy, sell or deal in the securities market including in IPOs, directly or indirectly till further directions as it was inter alia found that he had prima facie violated the provisions of Regulation 3 of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (for short the FUTP Regulations) and the provisions of Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines 2000 (for short DIP Guidelines). It was further directed to treat the said interim order as show cause notice against the entities named therein and an opportunity was also provided to the said entities to file their objections, if aggrieved. 2.1 Shri Shah vide letter dated July 11, 2006 inter alia stated that he had not violated the provisions of Securities and Exchange Board of India Act, 1992 (Act) or Regulations/Guidelines framed thereunder. He further stated that no opportunity of hearing was provided to him before passing the ad interim order dated April 27, 2006. According to him, he had acquired 15,595 shares of Suzlon Energy Ltd. (hereinafter referred to as the company) with an intention to make profits. He claimed that he had made the payments only after
Page 3 of 20 listing through a registered stock broker. He also stated “I have acquired shares through the market and then paid for the same on acquisition.” Shri Shah added that on receipt of the interim order he had obtained confirmation letters from the investors from whom he had purchased shares. According to him, the pre conditions to invoke the provisions of section 11(4) (b) of the Act have not been complied with by SEBI before passing the interim order dated April 27, 2006. He further requested for an opportunity of hearing. 2.2 Shri Shah appeared before me on November 6, 2006 and made
Page 4 of 20 is to protect the interests of the investors in securities and to regulate the securities market. The said duty is inter alia performed under sections 11, 11B of the Act which is the very soul and heart of it. The provisions of the Act such as sections 11B, 11(4) etc are meant to arm SEBI with authority so as to enable it effectively to exercise power and achieve the declared objectives of the Act. One cannot lose sight of the fact that SEBI has to regulate a speculative market and in such a market varied situations may arise, all of which cannot be envisaged and that there may be an urgent need to pass an order (without an opportunity of hearing), depending on exigencies. As regards his contention that initiation of investigation/ enquiry is a condition precedent for passing a direction under section 11(4) of the Act, I note that the powers under section 11(4) of the Act are in addition to and not in derogation of powers under sections 11(1), (2), (2A) and (3) and 11B of the Act. SEBI being the regulator carries with it all the necessary powers expressed or implied which are essential to meet any exigencies, in order to protect the interest of investors. In such circumstances, the contention that the initiation of investigation/inquiry is a condition precedent for the issuance of direction under section 11 (4) of the Act is difficult to accept. Further, SAT, in its order dated January 08, 2007 inter alia observed in the matter of Karvy Stock Broking Ltd. Vs SEBI
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Source: SecMarx — sebi:WTM/GA/53/ISD/2/08. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.