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The allotment of shares on preferential basis to the appellants before us is not in dispute. The allotment of preferential shares was made to the connected parties as concluded by the adjudicating officer in the impugned order. The interconnection between them has also been clearly brought out by the adjudicating officer in the impugned order.
We agree with learned counsel for the respondent Board that the alibi, that appellant does not understand English is not acceptable as he has given all his information in the KYC form in English and has also signed the said application form in English. His reply dated January 27, 2009 to the show cause notice is also in English where he has admitted the trades and claimed that they were entered in the normal market condition and on the basis of price prevailing in the market at the time of trading.
Transactions impugned in the order of the adjudicating officer took place in the ordinary course of business through the stock exchange mechanism and there was no connivance with CGMMPL and there was no knowledge about the counter party and time of execution. According to him, the transactions were at the market rate and they were not dictated by any prior information from Mr. Suresh Menon as alleged. It was submitted by him that there was no “front running” in the transaction in the alleged scrips and the adjudicating officer wrongly held the appellants as violating regulations 3 and 4 of the FUTP Regulations.
The appellant has been found guilty of self trade as well. Self trades admittedly are illegal. This Tribunal has held in several cases that self trades call for punitive action since they are illegal in nature.
Since every case is to be judged in the facts and circumstances of that case, one cannot hold the view that denial of inspection sought for by the appellant can be brushed aside on the ground of lack of prejudice or conclusion based on facts already considered in other orders relating to the appellants issued by the whole time member.
On a consideration of the facts on record, it has to be concluded that the appellants have not acted in compliance with the statutory requirements of the director of a company. The director of a company is expected to exercise due care and diligence in the approval of documents brought on the table during Board meetings.
The broker client agreement has got a statutory force since it is meant for observing the rules, bye-laws, regulations and circulars issued by the Exchange. In respect of instructions issued by an authorised representative specific reference is made to the letter authorising the said representatives.
It is highly improbable to believe the statement of Mrs. Bala Kaul that she bought shares of the target company because of its intrinsic value and strong fundamentals. If that was so, it is not clear, what made her sell these shares on April 10, 2008, when Solrex was still in the process of investing more money into the scrip of the target company.
It was argued by the appellants that the covenants in the non-compete agreement provide for both non-compete obligations as well as an obligation to maintain confidentiality. According to them, it is necessary and advisable to do so as a non-compete obligation without a corresponding obligation to maintain confidentiality, would render any non-compete agreement ineffective
It has been specifically pleaded by the appellant that during the investigation period, i.e. in the year 2002, there was no software available for carrying out long or real time surveillance and it was not possible to carry out surveillance of thousands of transactions of all clients on a daily basis. It has also been pleaded by the appellant that the impugned trades in the scrip of the company were done on behalf of its clients and the intra day trading was the normal/usual pattern of the trading adopted by the said client. The appellant had not entered into any proprietory trades in the scrip.
